Traders on the floor of the New York Stock Exchange called out orders for shares ofTwitter for the first time Thursday morning as one of Wall Street’s traditional rituals thrust the young company into the public markets.
On its inaugural day of trading, Twitter managed to avoid the missteps that marredFacebook’s initial public offering last year, though Twitter’s lofty stock market valuation added pressure on the company to turn a profit soon.
After being priced conservatively at $26 a share on Wednesday night, Twitter’s stock eventually began trading at $45.10 about 10:30 a.m. In its first hours on the market, the stock — trading under the ticker TWTR — rose as high as $50.09 a share before settling around $46 by midafternoon. Twitter’s shares closed at $44.90, 73 percent above its I.P.O. price but slightly below the opening figure.
“This is a giant poker game,” said Lawrence E. Leibowitz, chief operating officer of NYSE Euronext, as traders and bankers set the opening price in the minutes before Twitter’s stock began trading. “It will be a bit volatile, but it’s a very exciting deal.”Despite a smooth start to trading, Twitter is sure to face continued scrutiny as it works to justify a valuation of $31.7 billion to investors sensitive to the nuances of quarterly earnings reports.
Twitter executives entered the New York Stock Exchange building in Lower Manhattan on Thursday morning as a light rain fell, and the usual mix of tourists and financial workers mingled outside, some snapping photos of the giant Twitter banner draped over the neo-Classical-style building’s facade.
Inside, the floor of the exchange was unusually busy. An hour and a half before the opening bell, traders had staked out positions and a gaggle of reporters had assembled under the bell podium. Twitter’s bird logo was emblazoned on screens and posters throughout the exchange, and even plastered on the hardwood floors.
The first surprise of the morning came as Twitter’s entourage — led by the company’s chief executive, Dick Costolo; the chief financial officer, Mike Gupta; the co-founders Jack Dorsey, Evan Williams and Biz Stone; and the lead Goldman Sachsbanker on the offering, Anthony Noto — appeared not on the podium but on the trading floor below.
Ringing the bell in their place was an eclectic selection of Twitter users: the actorPatrick Stewart; Vivienne Harr, a 9-year-old girl who opened a lemonade stand to raise money to end child slavery; and Cheryl Fiandaca, the head of the Boston Police Department’s public information office.
In an interview after the bell-ringing, Mr. Stewart confessed he had been using Twitter for only a year and did not intend to buy the stock.
“I’m not a financial person at all and nobody should take my word as a good reason for investing in anything,” he said. “But it is a brilliant organization, and the impact it has worldwide is so extraordinary, and furthermore, it’s free.”
Even after other stocks on the Big Board began trading, however, Twitter shares were held back for more than an hour as the so-called price discovery process got underway.
The process, unique to the N.Y.S.E., allows an experienced market maker to gauge demand from both buyers and sellers, who shouted out tentative orders in a crush of traders in the middle of the exchange floor.
The aim was to zero in on a final opening price, reducing the sort of volatility that hampered Facebook’s debut on Nasdaq. Twitter’s designated market maker wasBarclays, and for more than an hour a representative from the bank set a number of price ranges, as low as $40 a share and as high as $47.
During this time, institutional investors who had placed orders with Twitter’s underwriters were being notified what allocations they received. Some were allocated fewer shares than they requested, while others received their full allocation. Those who did not receive the full amount placed new orders, driving the price up.
After more than an hour of price discovery, Twitter’s stock finally began trading.
Though somewhat arcane in the era of high-frequency trading, the N.Y.S.E.’s price-discovery process is one of the features that distinguishes it from crosstown rival Nasdaq, a purely electronic exchange.
“It’s great we have the human element to control it rather than the computer system at Nasdaq,” said Ryan O’Day of Rosenblatt Securities, one of the traders on the floor.
The offering was a significant victory for NYSE Euronext in its long-running competition with Nasdaq for premier stock listings. The N.Y.S.E. has regularly attracted more total listings than Nasdaq, but Nasdaq has been more popular and has long been identified with technology companies. Facebook, Google, Apple andMicrosoft all trade on Nasdaq.
But this year, for the first time, N.Y.S.E. has drawn a majority of technology listings, according to data from Thomson Reuters. After Thursday, the exchange was responsible for more than 70 percent of the money raised by technology companies.
Nasdaq has been losing influence in the start-up world in part because of a series of technology malfunctions. The most noteworthy was Facebook’s scrambled I.P.O., which turned a celebratory day sour and led to tens of millions of dollars in losses. More recently, in August, a computer problem shut down trading in all Nasdaq stocks. That happened soon before Twitter chose the N.Y.S.E. over Nasdaq.
The Big Board went to great lengths to ensure that it did not suffer a similar fate when the deluge of orders for Twitter came in. It held a trial I.P.O. on a Saturday morning in October and strenuously reviewed its systems.
Despite the long price-discovery process, traders on the floor applauded the smooth start to trading.
“The auctioning process really worked here today,” said Mark Otto, managing director for the broker J. Streicher & Company. “They took their time to make sure that the price was right. They gave all participants the opportunity to really react to the ranges that were sent out.”
Mr. Noto, the Goldman banker who led the I.P.O., expressed relief once trading was underway with a tweet that read simply “Phew!”
But some stock analysts were already cautioning that Twitter was overpriced. Soon after the stock began trading, Brian W. Wieser of Pivotal Research, who had a price target of $30 on Twitter before the shares began trading, downgraded the stock to sell.
“With a price that pushes into the high 30s and beyond, Twitter is simply too expensive,” he wrote in a client note. To justify the opening price of $45.10, Mr. Wieser said Twitter would have to report more than $6 billion in annual sales by 2018, compared with the roughly $600 million expected this year.
NYSE Euronext executives said that as long as shares did not fall below the price of the first trade, the day would be viewed as a success. “Everyone will be really happy as long as it closes above the open,” Mr. Leibowitz said. By that small measure, the I.P.O. did not succeed, with shares closing just below the price of the first trade.
But by raising billions of dollars for the company and pulling off a relatively smooth first day of trading, Twitter, its bankers and its exchange have little to complain about.
After the stock had been trading for some time, Twitter’s team assembled outside the N.Y.S.E., braving a pelting rain to have their picture taken in front of the exchange.
“It’s a proud day for the company,” Mr. Costolo said. “But we have a lot of work ahead of us.”
Nathaniel Popper and Vindu Goel contributed reporting.
