Twitter, the microblogging web site known for its 140-character snippets on everything from breaking news stories to embarrassing vulgar rants, held its initial public offering (IPO) on Thursday. As a result, over 1,600 of the company’s early employees are now millionaires.
Twitter co-founders Ev Williams and Jack Dorsey created the company back in March 2006 and formally incorporated it in 2007. Over the seven plus years since they founded the company, Twitter has grown to over 2,000 employees and has become one of the most widely used social networking sites in the word along with Facebook.
According to Alexa, which tracks visits to web sites, Twitter is the tenth most visited site on the Internet. Williams and Dorsey announced in September that it was time to capitalize on that traffic by taking the company public.
Twitter, which trades on the New York Stock Exchange under the symbol TWTR, announced via a tweet on Wednesday that they had priced 70 million shares of stock at $26 per share, giving the company a value of $18.2 billion. By the end of the first day of trading on November 7, the stock closed at $44.90, making the company worth a whopping $31.4 billion.
IPO Brings Influx of Funds to California
As a result of the IPO, Williams and Dorsey are now billionaires. Williams share in the company was worth over $2.5 billion. Dorsey’s stock was valued at just over $1 billion.
Dick Costolo, Twitter’s Chief Executive Officer, netted a paltry-by-comparison $350 million. In addition, hundreds of computer engineers saw their shares of stock become worth above $1 million overnight.
Sam Hamadeh, CEO of financial analysis firm PrivCo, noted the influx of money would have an impact on various aspect of the local economy.
“This one will have far implications for everything from real estate prices to new capital for other startups to California’s budget,” noted Hamadeh.
Hamadeh estimates that California will receive over $475 million in state income tax from the money earned by Twitter employees through the IPO.
“Very rarely do windows like these open up,” said Anamitra Banerji. Banerji was the 30th employee of Twitter. He created the “promoted tweet”, which is an advertisement pushed to the top of a user’s feed within the web site. Promoted tweets are responsible for a majority of the advertising dollars Twitter generates from its over 200 million active users.
Potential Worth of Twitter Yet to be Determined
Given how Twitter has become a household word, some experts believe the Twitter has not yet tapped its potential fully.
“Just as Google, Amazon, and Facebook have become Internet utilities, so too may Twitter,” wrote Mark Mahaney, an analyst at Royal Bank of Canada’s RBC Capital Market. “We think that current valuation does not fully reflect Twitter’s enormous opportunity.”
However, others urge caution with Twitter. While Twitter may have a potential upside, the company is not yet profitable.
“We are back at the dotcom days,” said Vivek Wadhwa, a fellow at Stanford University. “Twitter is a good company but nothing like these ridiculous predictions we’re hearing about. These analysts are smoking something.”
In the first three quarters of 2013, Twitter has lost almost $134 million. Twitter lost over $70 million in 2012.
Mark has been a contributor to legal web sites related to bankruptcy, tax, and criminal law since 2011. He has an Accounting degree from Texas A&M University.