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So, what does people here think about Twitter's valuation? Aren't they basically a 22 billion dollar advertising company? I am agnostic in this regard (although perhaps a little skeptical), but I was wondering what others think.
Google is a 350 billion dollar advertising company...
>Twitter and its banker, Goldman Sachs, widely miscalculated demand for the stock >Those who were able to secure an allocation of shares recognized an instant 73 percent gain Doesn't sound like miscalculation. I am confused why this seems to happen, though. I'd have to assume that the people at Twitter have access to more information and advice than I could possibly hope to understand. Even so, they choose to not use…
Does it have to be anything more than a kickback?
Earlier quoted context omitted.
Investment bankers' job is to allocate tens of millions of shares. Individual investors trade in small 100-1,000 share lots. Having an individual trade close at $50.09 doesn't mean you'll be able to move tens of millions of shares at $50.09.
But it sort of does imply that. Here's the reasoning -- There's a liquid market of a lot of shares trading hands at $40+. Anybody who bought a share at $26 knows he or she can sell today for $40+. To a first approximation, choosing not to sell at $40 has roughly the same effect as choosing to buy at $40. If the price is supported at $40+, that's at least very suggestive evidence that enough buyers could have been fou…
The IPO process is more or less bankers emailing clients asking "Hey, want to buy this brand new company at $26? How about $32?" You essentially have to make a decision without information on how other buyers behave, which forces conservative behavior.
Earlier quoted context omitted.
Does it have to be anything more than a kickback?
Well if you and I are thinking that the people running Twitter are dumb and left a billion dollars on the table, there may be more to the story.
Besides, it's not leaving money "on the table," it's handing it to non-company insiders, for the benefit of those who sold into the doubling.
So according to the Times entrepreneurs should spend years building companies and VCs hundreds of millions funding them so that when (and if) they've built a successful company that can be IPO'd they can take 5% of the total market cap of the company and give it to some Wall Street insiders to get some "credibility". Bankers are same folks that argue that they are adding efficiency to the market and thus deserve a bi…
Earlier quoted context omitted.
But it sort of does imply that. Here's the reasoning -- There's a liquid market of a lot of shares trading hands at $40+. Anybody who bought a share at $26 knows he or she can sell today for $40+. To a first approximation, choosing not to sell at $40 has roughly the same effect as choosing to buy at $40. If the price is supported at $40+, that's at least very suggestive evidence that enough buyers could have been fou…
That $40 floor exists once the market starts trading and there's external confirmation and safety in numbers. The IPO process is more or less bankers emailing clients asking "Hey, want to buy this brand new company at $26? How about $32?" You essentially have to make a decision without information on how other buyers behave, which forces conservative behavior.