(L-R) Twitter CEO Richard 'Dick' Costolo, and Twitter co-founders, Jack Dorsey, Evan Williams and Christopher Isaac 'Biz' Stone. applaud at the opening bell on the trading floor of the NYSE.(Image credit: AFP/Getty Images via @daylife)How Tweet it is.
In comments reminiscent of Sally Field's gushing 1985 Oscar acceptance speech, Twitter CEO Dick Costolo was in high spirits before, during, and after Twitter's Thursday IPO.
And why shouldn't he have been, having racked up something in the neighborhood of $384 million ( USA Today) as of the close of the first day of Twitter trading. Not bad for someone who originally invested $25,000 and has been CEO since October 2010. However, that is not to diminish Costolo's contributions, as he has frequently been noted as 'one of the most effective recent tech CEO's.' (TechCrunch)
And at least the wealth was shared a bit, as the San Jose Mercury News reported that 'more than 1,600 new millionaires are walking around today thanks to Twitter's initial public offering of stock. This will have will have far implications for everything from real estate prices to new capital for other startups to California's budget.'
Costolo spoke to Bloomberg in an interview just before the start of trading Thursday:
The thing that maybe surprised me most about the IPO process was the almost spectacular understanding of the service by so many potential investors across the country...they would show me Tweets in meetings...the opportunity to go talk to people to help them understand your vision and have them show you why they already know why it is so important is obviously tremendous...
Mr. Costolo, and the newly minted Twitter billionaires Evan Williams and Jack Dorsey, were worth just a tad less on paper Friday, as 'shares of Twitter tumbled by 7.26% to $41.64 as investors reassessed the money-losing company's valuation.' ( Forbes)
This came on the heels of the business press issuing cautionary warnings for the retail investor not to chase TWTR stock post-IPO, with reasons ranging from the lack of 'P' in the P/E, the nuances of float and stock lock-up periods for insiders, and the historic pattern of overhyped internet-based stocks to fall back from their initial euphoria.
The NY Post told investors, 'Resist the Urge,' pointing out that 'in seven of nine hot tech IPO's it has proven beneficial to wait for the frenzy to burn off...comparing the price of the first trade to closing prices after five trading days...this could boost your returns by up to 60%.'
In some unusual timing for her remarks, even SEC chair Mary Jo White 'warned that tech companies with a strong and growing user base wouldn't always translate into big future profits.' ( Financial Review) In comments last week referring to 'eye-watering website user numbers promoted by technology companies,' she specifically said:
In the absence of a clear description, it can be hard not to think that these big numbers will inevitably translate into big profits for the company. But the connection may not necessarily be there.
Whatever the future prospects for Twitter stock, last week's meteoric rise in value from the IPO price did not necessarily translate into a strong lift for the markets. The old good news is bad news and vice versa game was in full swing as ECB rate-cutting, Fed officials' comments, and U.S. GDP and jobs data led to several triple-digit moves for the Dow. For the week, the Dow gained 0.9%, the S&P was up 0.5% and the NASDAQ ended essentially flat.
The speculation on Fed taper action once again took sway, as institutional investors parsed data in rather cynical fashion. For example, the apparently gangbusters jobs numbers (+204,000) on Friday morning were met with an initial sell-off, as investors fretted that this might force the Fed's taper hand sooner than currently expected. But markets rebounded strongly to end the day, leaving observers to wonder if this was due to some 'weak internals' coming from the high number of low wage jobs being created, or true optimism on the better than expected numbers?
Schaeffer's Research commented:
On Monday, St. Louis Fed President James Bullard said policymakers need not rush to scale back their stimulus efforts, since inflationary pressures remain tame. However, Friday's stronger-than-expected jobs report initially sparked jitters, with investors wondering how long the Fed can justify standing pat. While stocks ended mostly higher for the week, bulls have reason to remain cautious.
But Twitter's debut and the see-saw market action were hardly the only stories of the week and let's take a quick look at what else was being said.
- 'This is a very bad deal.' -Israeli Prime Minister Benjamin Netanyahu as 'Israeli officials registered fierce opposition to an emerging international nuclear deal with Iran on Friday.' ( Washington Post)
- 'I promise you that nobody's been more frustrated. l wanted to go in and fix it myself, but I don't write code.' -President Obama on Friday, 'expressing frustration with the botched Obamacare insurance exchange website,' in a speech at the Port of New Orleans. ( Washington Examiner)
--'We may experience a prolonged period of low inflation.' -ECB President Mario Draghi as the ECB announced a surprise rate cut. According to the WSJ, the 0.25% cut came 'despite Germany's resistance' and 'underscored the risks that the recent inflation plunge in the euro zone poses to the region's fragile economy and the global recovery.'
And in a very much related story, Bill Gross of PIMCO told Bloomberg this week, 'Inflation levels are at unacceptable, dangerous territory at the moment,' and he expects not less but 'more accommodative action' from the Yellen Fed when Ben Bernanke's term ends on January 31, 2104.
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