Twitter's Finance IPO
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What type of IPO should Twitter use - a traditional IPO or an online auction?
Some issues to consider in answering the above question include:
i) The type of investors Twitter is likely to attract
ii) The lessons learned from Google and Morningstar from their auction IPOs
iii) Advantages of each type of IPO
iv) Costs and risks of each type of IPO.
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The response is 1027 words regarding Twitter's finance IPO and includes three references.
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The type of investors Twitter is likely to attract
Twitter is a social networking website with billions of users. For a social networking website its extremely beneficial to have their users as investors. Generally the social networking website like there users to become their investors and the main reason behind this is that it helps the company to grow with the help of their users as investors. For this the company will have to make its IPOs available to its entire users who are individual investors in this case. To issue IPOs to the customers is only possible with the auction process because it allows all investors to submit a bid for its stock by a specific deadline. Using traditional process would lead to allow investment bankers to place the IPOs largely to the institutional investor making a large amount of twitter users away from participating.
The lessons learned from Google and Morningstar from their auction IPOs
Google IPO suffered from mispricing. Google auction process resulted in a price of $85 per share causing a huge loss for the company. Initially Google hoped to sell its shares for between $118 and $135 per share but ended up with $85 per share. Following are main reason behind this mispricing:
(i) The main reason behind this mispricing was the lack of information on the part of the small investor. The small investors/ customers of Google as well as Morningstar may lack access to sufficiently detailed information sources to appropriately price the Google share price based on fundamentals, rather than on name ...
Education
- MBA, Indian Institute of Finance
- Bsc, Madras University
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