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Twilio stock climbs more than 90 percent in opening day of IPO

By Shawn Knight
Jun 23, 2016
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  1. San Francisco-based technology “unicorn” Twilio went public Thursday morning on the New York Stock Exchange. The company priced its IPO at $15 a share which received a very warm welcome from investors.

    A unicorn is described as a startup that has a valuation of at least $1 billion.

    Twilio’s share value flirted with the $30 mark minutes before the market closed, ultimately finishing the day at $28.79 – a 92 percent increase over its $15 price point. This was the biggest first-day pop of any US-listed IPO this year and the first in 2016 to price above expectations according to Dealogic.

    At its $28.79 closing, Twilio has a market value of $2.4 billion. In previous financial rounds, The Wall Street Journal notes, it was only valued at around $1 billion, or $11.31 per share.

    Twilio’s success, the publication said, serves as an optimistic sign for other tech startups considering going public in a market that’s been sluggish as of late.

    Twilio provides software that helps companies communicate with their customers. Uber, OpenTable and WhatsApp are just a few of its many high-profile clients. Despite nearly doubling its revenue to $166.9 million in 2015, the company has yet to turn a profit, posting a net loss of $35.5 million last year.

    Twilio CEO Jeff Lawson was no doubt happy about his company’s performance but told CNBC that this is just the beginning of a very long time as a company that’s publicly traded. He added that they’re not worried too much about the opening price but rather, the long term.

    Image courtesy Brendan McDermid, Reuters

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  2. Raoul Duke

    Raoul Duke TS Guru Posts: 930   +354

    When I see this stuff, why is the first thought that crosses my mind is "scam". From the article:
    "valuation of at least $1 Billion"
    share value finished the day up 92%
    "the company has yet to turn a profit, posting a net loss of $35.5 million last year."
    If this makes sense to anyone, please explain
     
  3. MilwaukeeMike

    MilwaukeeMike TS Evangelist Posts: 2,750   +1,105

    I'll give it a shot...

    Company valuation = Stock Price * Oustanding Shares. For example - Apple is trading at $93 per share and they have like 5.5 billion shares. So they are worth about 514 billion dollars (finance.yahoo.com has all this stuff). A Share is a piece of ownership in the company, so if you wanted to buy the entire company you'd have to buy all the shares. When they say 'valuation of $1 Billion' that means it would cost you $1 billion to buy all the shares - no one ever does, but it's what the company is 'worth' based on it's current price per share.

    When the day started the share price was $15. It goes up because someone tries to sell it at $15.50 and someone says 'Ok, I'll buy at $15.50. Well - maybe someone else sells it at $15.75. And then someone sees it going up and think it'll go up to $20, so he buys some at $16.50. This happens over and over again until people start to think 'Maybe this is all this company is worth' and then it stops. For Twilio it stopped at about $30. Today it's at $27.88 - and the price changes constantly - it's always shown as the last price it traded at.

    How much money Twilio makes goes into what people think the stock is worth - but people care mostly revenues - not profit. And they look at why they don't have a profit. Is it because they are growing and building a factory (which is OK) or is it because they have borrowed so much they're being crippled by debt and might soon go under (not OK).

    It's perfectly normal for a new company to spend a lot of money on growth (hiring more people, building new things, expanding etc) and that cuts into profits. This is OK because it allows a company to grow - if you had to turn a profit from every year from year 1 you'd probably never do it.

    Let me know if this doesn't make sense or if you have any specific questions.
     
    Hexic and Raoul Duke like this.
  4. Raoul Duke

    Raoul Duke TS Guru Posts: 930   +354

    Thank you @MilwaukeeMike excellent clear explanation
    I guess the problem that was hurting my head was over the use and meaning of the word 'value'
    In my mind if I substitute 'cost' as in what it would cost to acquire all the shares etc, then it all makes much more sense.
    thanks again for the explanation, I had no knowledge of this field
     
  5. mccartercar

    mccartercar TS Booster Posts: 134   +25

    Is it bad that I had no idea what these guys did and had never heard of them?
     
  6. Hexic

    Hexic TS Addict Posts: 283   +132

    As a company, your assets (cash, land, debt owed to you, among many others) is obviously a good thing. The stock price is effectively based on perception - how the public, or those potential investors, THINK your company is going to do.

    Now, where this gets a tad tricky if you aren't an accountant, experienced investor, or know things you aren't supposed to - is how your assets are being spent. A simple example of this would be using your cash (an asset) to purchase more land, or let's say, vehicles as well, for the sole use of your company.

    Technically, you spent cash in the acquisition of more assets, which could be construed as a liability (money you owe). In reality, these two situations would typically be more beneficial for the company - because they're making investments to obtain more assets for the company.. something that leads to future growth. Future growth means future revenues, which means more money the shareholders make. This behavior usually leads to more investing within a company, stock prices increase, etc. etc. good things.

    You can keep going down the rabbit hole with potential dividend payouts, stock splits, etc - but I hope this supplements MilwaukeeMike's post decently for ya. :]
     
    Raoul Duke likes this.
  7. Raoul Duke

    Raoul Duke TS Guru Posts: 930   +354

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