A trader raises his hand just before the Twitter IPO begins on the floor of the New York Stock Exchange

Twitter shares rocket to $25bn in trading debut

Twitter shares jumped 73 per cent in a frenzied trading debut that drove the company's market value to about $25bn.

The stock closed its first day of trade on the New York Stock Exchange at $44.90 a share after hitting a session-high of $50, nearly double the initial public offering (IPO) price of $26 set late on Wednesday.

Twitter could raise $2.1bn if an underwriters' over-allotment is exercised, as expected, making it the second largest Internet offering in the USA behind Facebook's $16bn IPO last year and ahead of Google’s 2004 IPO, according to Thomson Reuters data.

But while yesterday’s strong performance is encouraging for venture capitalists who have backed other consumer Web startups, such as Square or Pinterest, it has sounded alarm bells for some investors who sees echoes of the dot-com bubble of the late 90s.

"@twitter opening at $45/share? Almost 50x revenues! We are officially in another tech bubble," tweeted financier and investment advisor Steve Rattner.

But fans believe the seven-year-old company, which has 230 million users, has established itself as an indispensable Internet utility alongside Google and Facebook, and that it has only scratched the surface of its potential as a global advertising medium.

"When people use Twitter they are following certain people, they're searching for specific information," said Mark Mahaney, an analyst at RBC Capital Markets. "There are powerful marketing signals that are almost Google-esque, something that Facebook doesn't really have."

The IPO was shadowed for months by Facebook's troubled 2012 debut, in which the shares quickly fell below their offering price amid trading glitches and subjected the company and its lead banker, Morgan Stanley, to accusations that they had been greedy in pricing the deal.

Twitter's opening appeared to go off without a hitch, prompting Anthony Noto, the Goldman Sachs banker who led the IPO, to write a simple Tweet: "Phew!"

Still, Twitter may find itself subject to the opposite criticism, that it had priced the shares too low and left more than a billion dollars on the table.

"In my mind they certainly could've raised the price on this thing and gone into the low 30s," said Ken Polcari, director of the NYSE floor division at O'Neil Securities. "From an outsider looking in I would say they were overly cautious because they didn't want a disaster on their hands ... I'm sure the company didn't want a Facebook debacle, I get that, but I think they were overly cautious and it cost them some money."

The IPO is the latest milestone for a service that was born out of a nearly-defunct startup in 2006 and was derided by many in its early years as a silly fad dominated by people talking about what they had for breakfast.

But in recent years the, the fast-moving, mobile service was credited with fueling popular protests that upended the Arab world in 2011; served as a lifeline to the outside world for users during natural disasters like Hurricane Sandy; and also instantly relayed news such as early rumblings of the 2011 US raid on Osama bin Laden's compound in Pakistan.

"Twitter has, when coupled with the increasing distribution of smart phones and reach of the Internet, an impact on global connectivity and transparency," said P.J. Crowley, the former US State Department spokesman. "It has definitely contributed to the acceleration of the news process and helped to expand the availability of information sources to a wide range of people."

Under Dick Costolo, who took over as CEO in October 2010, Twitter has rapidly ramped up its money-making engine by selling "promoted tweets," messages from marketers that are distributed to a wide-ranging but targeted group of users. In the third quarter, Twitter had $168m in revenue, it said, more than double from a year prior.

But investor enthusiasm for the microblogging company defied traditional valuation analyses as shares traded at about 22 times forecast 2014 sales, nearly double the multiple at social media rivals Facebook and LinkedIn, even though Twitter is far from turning a profit and posted a loss of almost $70m for its most recent quarter.

Twitter's successful debut is likely to stoke interest in other up-and-coming consumer Internet companies such as ride service Uber, scrapbooking site Pinterest, accommodation service Airbnb and the payment start-up Square, all of which boast private-market valuations well north of a billion dollars and could go public in the coming years.

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