If the modern financial media had been around in 1858, while Cyrus West Field was laying the first transatlantic telegraph cable under the ocean, we'd have been treated to hundreds of screeching headlines about the project's lack of immediate profitability -- rather than marveling at the instantaneous connection being established between two continents. I think there is a similar disconnect between the skepticism with which Twitter will be viewed in the near term and the miraculous nature of what it has actually built.
I'm not going to make a prediction about what the Twitter IPO will do in its first days of trading. I will, however, disclose my plan to buy shares for my own personal account in the secondary market, pretty much no matter where it opens up. I'm giving you my bias upfront so that we can dispense with any suspicion and make some important points here.
I've said consistently for three years now that Twitter is a one-of-a-kind, global information utility that probably will not be replicated or challenged any time soon. It's changed the worldculturally and politically, and its creators have barely even scratched the surface in terms of what it might be capable of for business purposes.
Twitter shares may trade lower or higher upon coming public as market mechanics and The Street's myopic perceptions manifest themselves in the stock's valuation. I plan to ignore most of what I hear because I want in for the future, and I'm willing to risk that my initial buy-in price is too high.
By the way, I don't recommend that anyone else invest this way. It's pretty reckless and unconventional, but I have a different game plan than most.
The key point I want to make here is that what happened with Facebook (FB) in May of 2012 has no bearing on what will or won't happen with Twitter. Retail investors will have difficulty seeing the difference between the two events. The media will also struggle to separate them because "Here we go again!" is a classic journalism trope that practically writes itself.
I believe the press will mostly be wrong in relentlessly making this Facebook-Twitter comparison, as they inevitably will. Everyone's got a pageview quota to fill, and potential bad news travels faster than a moderate forecast. In my view, Facebook's poorly-executed IPO won't matter for Twitter's precisely because of the lengths The Street has gone in distancing itself from that embarrassment. I would point out that Twitter itself has gone to great pains to distinguish its coming offering as well. In addition, we know that the exchanges will also be exceedingly more vigilant and alert to potential hiccups, regardless of which the company chooses to list on. Finally, the media hype machine will be more subdued than last time -- and certainly more chaste.
Below are three things that will absolutely not happen with Twitter's IPO ...
Dumping stock on Mom and Pop
Morgan Stanley (MS) won't lead the deal, although it will play a big part in the syndicate. Twitter's gone with Goldman (GS) -- which means the lead underwriter isn't attached to a massive retail brokerage salesforce. Given what will be the deal's likely size, retail brokers will get allocations, but they won't have stock dumped on them like they did with Facebook.
Any broker will tell you that the kiss of death on a new issue is whenever you're actually being granted the size you had indicated for. In my prior life as a broker, any time I had submitted a request for X number of shares for clients and the answer came back, "Yes, okay," it was a sure sign that the deal was doomed.