Breakout

4 Reasons Twitter’s IPO Rocked Where Facebook’s Rolled

Breakout

Twitter's (TWTR) first day of trading was a banner one. The stock priced at $26, shot up as high as $50.09 and closed the day at $44.90 a share, notching in a sweet 72% first-day gain from the IPO price.  Ask a trader why Twitter's long-awaited trading debut went off without a hitch and you're apt to hear a lot about "timing."

That's because, just 18 months after Facebook's (FB) bungled and botched initial public offering, the contrasts between Twitter's IPO are stark, and numerous.

As my co-host Jeff Macke and I discuss in the attached video, there are at least four key reasons why the micro-blogging website got off to such a strong start compared to its upstate Silicon Valley rival.

1) Timing

Not only is the stock market up 25% year-to-date and at an all time high, but it is also November, which is perennially one of the year's best months for market gains. Furthermore, within this den of bullishness, investor appetite for IPO's in general, and social media more specifically, has driven those sectors to even better performance this year.

For it's part, Facebook's May 2012 IPO was done during a downturn, which had just shaved about seven percent off the the S&P 500.

2) NYSE Nails It

It was pretty clear from the outset that Twitter's listing was essentially going to try to be the anti-Facebook. The most basic way to ensure that was to list the stock on the New York Stock Exchange, instead of the Nasdaq, which has been the customary destination for tech deals. Not only did the NYSE get the stock open and trading in under 90 minutes, but the did so at a price that facilitated an orderly marketplace. Remember, for every share of Twitter that was issued, there were orders for 30 more. Balancing that kind of imbalance is an art and the NYSE took it in stride, as they should have.

3) Why Wait?

When Facebook came to market it had a billion users, growing revenues and was already turning a profit. Its stock had been changing hands privately for years before the actual public debut, and it was a poorly kept secret on Wall Street that the inner circle of bankers and executives overseeing the deal wanted to see a $100 billion business emerge from the fracas.

Twitter, on the other hand, is still young and leaves a lot more to the imagination of investors, who proved more than willing to speculate as to what this budding business might look like - and be worth - in another year, or two or three. An 80-percent first day pop says it all, whereas Facebook shares finished their first day flat, and didn't bottom out for nearly four months.

4) First is Worst

There's a reason why test pilots are typically well paid and young. Along that same line of thinking, it would be hard to overstate the benefits Twitter derived from watching Facebook enter the public domain. But watching is only half the battle, since Twitter clearly watched, took notes, and then made sure not to repeat the same mistakes.

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