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November 07,2013
The most hotly anticipated stock offering of the year did not disappoint. Shares of Twitter jumped nearly 75 percent above the opening price of 26 dollars at the opening bell of the New York Stock Exchange. The seven-year-old online micro-blogging service is now valued at more than $30 billion. But despite a stellar opening, many still have doubts about how profitable the company will be.
The little white bird soared at the start of the opening bell - raising nearly $2 billion on its first day as a publicly traded company. Market analyst Max Wolff called it impressive.
“Well, we saw a very nicely staged, managed IPO of a very exciting company with obviously huge demand. We had already heard that it was 30 times over-subscribed. We saw some evidence of it. And we basically saw this company triple off the low end of its range from just one week ago," said Wolff.
But analysts say don’t buy into the hype. Investment manager Hilary Kramer says Twitter is a valuable brand, but it has yet to prove it can be profitable.
“Twitter unto itself is a name and is a brand that has billions of dollars of value, but is it worth $30 billion? No. I want to see some real profitability on the bottom line. Twitter has to figure out how to make money," said Kramer.
Valuation experts say the immediate challenge is how to turn Twitter’s 230 million online users into willing consumers. Economist Aswath Damodaran says boosting advertising revenue will be key. He spoke with VOA via Skype.
“So they need people clicking on those ads and going and buying products because if that doesn’t come through, I don’t care how many users you have. If you can’t make money off those users, nobody really cares," said Damodaran.
Twitter posted a $69-million loss this year, but Hilary Kramer says the smart investor needs to look beyond this. She says what’s exciting is the company’s potential.
“A lot of the money that Twitter has raised in this initial public offering is going towards buying other companies that can help them get to that next step," he said.
Twitter shares closed at $44.90 on its first day. That's nearly 73 percent above its initial opening price -making it the second largest technology IPO on record.
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