Fantastic opening day for the IPO of the year
‘Rock stars’. That’s how another Silicon Valley IR executive described Twitter’s two new IROs – and that was before the company’s stellar debut on the NYSE today. Now they can take a bow along with the rest of the Twitter team.
Or as the lead Goldman Sachs banker tweeted when trading opened, ‘Phew.’ The market needed this: a big internet IPO priced above its range, opening with a pop and trading up on opening day without any glitches.
That pop was the sound of anxiety leaving Wall Street like air from a balloon – or bubbly from a bottle, clearing the way for other consumer focused internet companies like Airbnb and Dropbox.
Even if Twitter did just close the day a hair under its opening trading price of $45.10, it’s still 73 percent above the IPO price of $26, which was above the range of $23 to $25, which was bumped from $14 to $17.
Twitter’s new valuation of over $30 bn may be questioned, as is when and how much of a profit it can turn. Plus some say such a big pop means the company left hundreds of millions on the table.
Yet Twitter came out of its IPO with Wall Street fans. The offering looks to have been superbly handled by the company, its advisors and the NYSE. Even the bankers earned some portion of their big paychecks.
How did Twitter’s unveiling turn out so much better than Facebook’s shambolic May 2012 IPO? Quite aside from the technology glitch that delayed the beginning of Facebook’s trading, there are several key differences.
1. The simpler the better. Twitter took a low-key process to the entire IPO process. Its S-1 offering prospectus sidestepped the kind of lofty manifesto issued by Mark Zuckerberg and stuck to the same minimalist approach as its social network. The shareholder letter wasn’t quite 140 characters, but it was just 135 words. Plus, there was no accounting jiggery-pokery in the S-1 like in Groupon’s early drafts.
Twitter got some flack for taking advantage of the JOBS Act and initially filing its prospectus confidentially, as though it were trying to hide something. But that criticism turned out to be unfounded. As Steven Davidoff wrote in the New York Times’ DealBook, ‘Twitter appears to be the first big tech IPO in which a company simply prepared a thorough filing without pushing the boundaries.’
2. No hype on the roadshow. There was said to be little ‘fanfare’ and more ‘nuts and bolts’ on the tour by Twitter management – a ‘wet blanket’ on the flames of enthusiasm. Dark suits instead of hoodies.
3. Insiders aren’t selling. A lot of Facebook’s offering was employees and early investors selling their shares, and the company had another billion or so shares coming out of lockup the year after its IPO. Twitter will have far fewer shares dumped into the market. For one thing, bankers got existing shareholders to sign a 180-day lockup.
4. Long IR runway. Twitter brought in former Pixar IR executive Nils Erdmann in February 2011, well over two years before its IPO, which is an incredibly long lead time for a tech IPO. Erdmann was an associate analyst under Henry Blodget back in the twilight days of the internet bubble. After his stint at Pixar he went on to do IR for Sonic Solutions, which was acquired by Rovi, and GoFish, which turned into Betawave.
According to her LinkedIn profile, Krista Bessinger came over to Twitter just a few weeks ago from the IR team at Zynga, where Twitter’s CFO, Mike Gupta, used to work. A former sell-side and buy-side analyst, Bessinger got Oracle nominated for ‘most progress’ in the IR Magazine US Awards 2007. ‘The hiring of Krista Bessinger and her team was a dramatic improvement – she is knowledgeable and helpful,’ commented one analyst. After Oracle she went to the IR team at Google and wound up as head of finance for YouTube.
5. Could break new ground in IR. Twitter’s S-1 says it will use SEC filings, press releases, its website and its corporate blog at blog.twitter.com for disclosure. Plus it advises investors to follow it on Twitter – natch – using @dickc, @twitter and @twitterIR (the last being a brand new account).
The shiny new IR site is bare-bones for now – even with its embedded Twitter feed. But with Canada’s Q4 Web Systems hosting it, there’s a good chance it could grow much more interesting.
Bessinger and Erdmann also look to have Twitter feeds, so hopefully they’ll join the ranks of tweeting IROs like LinkedIn’s Matt Sonefeldt, Pandora’s Dominic Paschel and Zillow’s RJ Jones.
6. It’s just a great time to go public. The market is up, volatility is down, the government is up and running, the US isn’t defaulting on its debt, the Fed isn’t tapering, the sky isn’t falling. Twitter’s timing was perfect.
I had a short but fun radio experience this week, talking about Twitter's IPO on NPR's Morning Edition. Listen here.