10 ways Twitter's IPO isn't like Facebook's

They're both social media stocks, but that's about where the similarities end.

By Forbes Digital Nov 7, 2013 4:05PM
Credit: © Richard Drew/AP
Caption: A Twitter logo an updated phone post is shown the floor of the New York Stock Exchange Monday, Nov. 4, 2013, in New YorkBy Nathan Vardi, Forbes Staff

Twitter (TWTR) worked hard to make sure that its initial public offering didn’t turn into the kind of debacle that Facebook experienced when it started out as a publicly traded company.

Twitter sold 70 million shares for $26 each in its IPO, and so far on Thursday things are looking very different than they did back in May 2012. The company operates in a highly competitive industry, however, and will still have to work hard to justify the valuation that investors have given it, but here are 10 ways Twitter’s IPO differed from Facebook’s IPO:

1. Banker buying not needed. Twitter’s stock hasn’t needed massive support from its bankers to trade above its IPO price and is headed to close well above it on the first day of trading. In May 2012, Morgan Stanley had to feverishly buy Facebook stock to keep it above $38.

2. New York, New York.  Mark Zuckerberg rung in the Facebook IPO on Nasdaq at a ceremony in Menlo Park, Calif. But Twitter chose to buck the long tradition that has seen hot Silicon Valley tech companies list on Nasdaq and instead chose the New York Stock Exchange. Twitter CEO Dick Costolo and the company’s founders showed up in lower Manhattan this morning prior to Twitter’s opening on the NYSE.

3. No stock market glitch. Shares of Twitter started trading on Thursday morning without any problems. In Facebook’s case, an issue with Nasdaq’s computer programming delayed trading for some 30 minutes and caused confusion among traders. As a result, Nasdaq ended up paying  a $10 million fine to the Securities & Exchange Commission and tens of millions more to brokers who lost money.

4. It’s tiny. Facebook increased the size of its IPO in the days leading up to it and raised $16 billion. But while Twitter increased the price of the IPO as demand rose, it did not upsize it. Twitter raised some $1.8 billion and the IPO gave the company a valuation of $14.4 billion, or some $18 billion depending if you count its restricted shares. Facebook’s IPO valued the company at more than $100 billion.

5. Insiders not selling. Twitter will keep all the money raised in its IPO and use it for general corporate purposes, capital expenditures, or save it for a rainy day. On the other hand, more than half the money raised in Facebook’s IPO went into the pockets of early shareholders of the company, like venture capitalists and hedge funds.

6. Goldman Sachs. The lead underwriter for the Twitter IPO was Goldman Sachs. For years, the big Silicon Valley IPOs, including Facebook’s IPO, were led by Morgan Stanley. Goldman worked to keep much of the offering out of the hands of retail investors and hedge funds that like to short stocks, opting instead for big long-only funds.

7. No profits. Facebook was earning money, $1 billion in the calendar year prior to the IPO. But Twitter has lost $133.9 million in the first nine months of 2013. Still, Twitter is going public at an earlier stage in its growth curve, which might make it easier for Twitter to meet high investor expectations as long as Twitter doesn’t cause them to lose faith in its story.

8. Fewer users. With some 230 million active users, Twitter has about one-fifth of the user base of Facebook today. When it went public, Facebook had 900 million users.

9. Less lock-up. Facebook had more than 1 billion shares ominously coming off of lock-up restrictions within a year of its IPO. The number of shares Twitter will have coming off of lock-up restrictions in the next year will be much more modest.

10. Twitter is up big on IPO day. Shares of Twitter opened at $45.10 and rose by about 80% in afternoon trading from its IPO price. That will give it fans on Wall Street, an important new constituency. But it also means that Twitter left hundreds of millions of dollars on the table.

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