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Twitter Spikes 73% In 1st Trading Day For Social Site IPO

Twitter (TWTR) jumped 73% in Thursday's debut, as the still-fluttering microblog site launched the second-largest Internet IPO ever after Facebook.

Shares of Twitter opened at 45.10 and traded in a range of 44 to 50.09. They closed at 44.90 as the broader market sold off hard.

Twitter late Wednesday sold 70 million shares at $26 apiece, raising $1.82 billion in its initial public offering. That was above a recently raised expected price range of $23-$25. Underwriters led by Goldman Sachs have a 30-day option to buy another 10.5 million shares.

"Institutions are willing to buy on the future of Twitter," said Francis Gaskins, who analyzes offerings at IPO Desktop and Equities.com. "Investors are having a love affair with stocks with high-growth top lines and they see Twitter as a play in mobile advertising.

More than 117 million Twitter shares changed hands via the New York Stock Exchange.

The social network lets users post 140-character messages that are relayed to their "followers." (This story's lede, by the way, is 140 characters.) Founded in 2006, Twitter boasted 232 million monthly users in Q3. More than 350 billion messages, or "tweets," have been posted.

The company sells advertising against those posts. In Q3 some 70% of its $168.6 million in revenue came via mobile ads.

Twitter is not yet profitable and sales growth is slowing, but its IPO was the second-largest Internet new issue of all time, behind only Facebook (FB), which raised $16 billion in May 2012.

IPO success is hard to gauge, says Renaissance Capital Principal Kathleen Smith. If investors on the open market were willing to pay more than 45, Twitter could have priced more aggressively to raise more money.

But the general thinking is that it was better for Twitter to climb too much on the first day than to price too high and fall.

"It's deadly to go down," said Smith, adding that 28% of IPOs launched this year are trading below their IPO price vs. 21% for all of 2012.

Initial Wall Street coverage on Twitter was mostly positive. The eight analysts polled by Thomson Reuters all have buy ratings.

Twitter has become a sort of ubiquitous "Internet utility," like Google (GOOG), Amazon.com (AMZN) and Facebook, says RBC Capital Markets analyst Mark Mahaney, who initiated coverage late Wednesday with an outperform.

"We think that current valuation does not fully reflect Twitter's enormous opportunity," wrote Mahaney at the time, as he set his price target at 33.

After Twitter's big debut, Pivotal Research cut it to sell from buy.

As might be expected, much of the official information on Twitter's debut came via Twitter.

Hashtag History In the 89 minutes from when Twitter executives rang NYSE's opening bell at 9:30 a.m. ET and when the stock started trading, officials at the NYSE tweeted updates about the negotiations going on between underwriters and floor traders about where the stock would open.

It was clear early on in that process that Twitter would open well above the IPO price.

At 9:50 a.m. ET, NYSE tweeted a message that the expected opening range was 40-44.

By 10:35 a.m. that range had climbed to 45.50-46.50.

"$TWTR is officially #OPEN on the #NYSE at $45.10," NYSE said via Twitter at 10:49 a.m. ET.

Many tweets sent by Twitter employees at its San Francisco HQ were some variation of: "All right, back to work.

Said spokesman Jim Prosser via email: "Business as usual!"