Twitter stock: A disappointing first year 

Twitter (TWTR) sold shares to investors exactly one year ago today — and it’s been disappointing lesson for most regular investors. Privileged investors are up big on Twitter – but most everyone else found out how expensive hype can be.

Back on Nov. 6, 2013, Twitter sold 70 million shares of its stock to initial investors at $26 a share. These first investors — typically high-net worth investors and large mutual funds — are sitting pretty. Shares are up 58% from the initial price.

But here’s the problem. Most common investors couldn’t get shares at that offering price. Instead, many waiting for the lucky investors to sell and bought at the first-day closing price of $40.37 on Nov. 7, 2013. These investors are up just 2% during that time, while the Standard & Poor’s 500 is up 16%. #oops

Twitter is a reminder of the harsh reality of IPOs — by the time you can actually buy shares it’s often too late to make money. The rush of investors to buy overhyped stocks drives the price up — leading to disappointing future returns. Privileged investors get the shares at the attractive offering price — and then sell — locking in their gains while regular investors chase the shares on the open and often wind up overpaying for them.

What’s even more confusing for investors is that the company has performed admirably. Revenue during the September quarter has more than doubled from the same year-ago period to $361 million. And the company has met or topped quarterly earnings expectations four out of the past five quarter, says S&P Capital IQ.

But the problem is losses have also widened. The company reported a net loss of $176 million during the September quarter, much deeper than its $64.6 million loss in the September quarter a year ago.

Perhaps Twitter shares will redeem themselves – now that much of the hype is gone. Analysts have an average 18-month price target on the stock of $52.07. If the analysts are right, that would be a 27% upside.

Source: usa today – Twitter stock: A disappointing first year

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