Tuesday, October 29, 2013

Finally a Twitter IPO alert from Fidelity

At 11 AM today I finally got an email alert from Fidelity for the Twitter IPO. Of course, I'm still not "eligible" for IPO's at Fidelity since I don't have $500,000 in assets with them, but I guess they just wanted me to know what I am missing out on.

-- Jack Krupansky

Monday, October 28, 2013

Twitter IPO now available from Fidelity - but not for me!

I just checked the IPO list for Fidelity and Twitter is now on their list. Unfortunately, my modest-sized account is not "eligible" for IPOs with Fidelity.
Their fine print:
You are not eligible to participate in equity new issue offerings through Fidelity Investments. Eligibility is reserved for brokerage customers with a minimum of $500,000. Auction OpenIPOs and Secondary offerings made available through Fidelity are reserved for brokerage customers with a minimum of $100,000 in certain assets held at Fidelity. Members of Premium Services or customers who have placed 36 or more stock, fixed income, or option trades in a rolling 12-month period are eligible for either traditional or auction based offerings.
Chalk up yet another reason to continue moving away from Fidelity. The bulk of my securities are still with Fidelity, but I don't intend to give them any new business – and that was before this latest incident.
BTW, I had gotten email alerts earlier in the day for several other new IPOs from Fidelity, but there has not been an email alert for Twitter from Fidelity yet.
-- Jack Krupansky

Updated Twitter IPO valuation by Prof. Aswath Damodaran

Here's an update to the interesting in-depth look at the valuation for Twitter by Aswath Damodaran, Professor of Finance at the Stern School of Business at NYU:
His bottom line:
My completely uninformed guess is that the bankers think that Twitter's fair price is closer to $25/share and that they have set the range at roughly 20% below those estimates. If the offering goes as choreographed, here is how it should unfold.
  1. The road show will be well received and the bankers will announce (reluctantly) that the high enthusiasm shown by investors has pushed them to set the offering price at $20/share.
  2. Institutional investors will start lining up for their preferred allotments at that offering price and the enthusiasm bubble will grow.
  3. On the offering date, the stock will jump about 20%-25%, leading to headlines the next day about the riches endowed on those who were lucky or privileged enough to get the shares in the offering.
  4. Some of the rest of us, who were not lucky or privileged enough to be part of the offering, will be drawn by these news stories into the stock, pushing the price higher, and keeping the momentum game going.
  5. In a few months or perhaps a year, some of the owners of Twitter (big investors and venture capitalists) will be able to sell their shares and cash out.
So, what can go wrong with this script? The biggest actor in this play is Mr. Market, a notoriously moody, unpredictable and perhaps bipolar (though that may require a clinical judgment) character. As was the case in Facebook, a last minute tantrum by Mr. Market can lay waste the best laid plans of banks and analysts.
His revised estimate the value per share increased to $17.84/share. The current IPO price range is $17 to $20.
His real bottom line:
If the momentum game turns against the stock and the price drops to $10/share, I will be ready to by [sic].
Yes, I will in fact keep enough reserve cash so that I too can buy (more) if TWTR does eventually fall to $10. I bought some Facebook (FB) when it was under $18, but I didn't "participate" in its IPO.

-- Jack Krupansky

Twitter IPO - on the list

The Twitter IPO is getting near the end game. On Friday my broker (Muriel Siebert) had them listed on their IPO list. Early this morning I got an email alert from my broker indicating that I could call "to place an indication of interest", so I did, and now I'm on my broker's list.
As they said, this is not an order (yet) and merely an "indication of interest" and not an actual "allocation." They asked how many shares I was "interested" in. I said 2,500, not that I actually expect to get that many, but I'll take as much as I can get. They said they will call me if I do get an allocation ("and if you don't hear from us, it means you didn't get an allocation.")
When I mentioned the $20 price as the upper end of the price range, they were clear that the price range is not final.
Anyways, the wheels are in motion and my "indication of interest" is on the Twitter IPO train. Or maybe it would be more appropriate to say that I have been directed to the train platform and have a "standby" ticket.
My understanding is that the final pricing would occur after the close on November 6, 2013, so I would imagine that my "order" cannot be finalized until that time. But... I expect that the allocation would be set a bit before then. It has been many years since I participated in an IPO, so I'm not positive about the precise sequence and timing.
I'll consider my effort successful if I am allocated 500 or even 200 shares. Otherwise, I'll have to continue with earlier plans to plan market and limit orders on opening day. Actually, if I get less than 500 shares on the IPO, I'll still try to get more on the open market. Otherwise, I'll reserve the cash for buying on dips.
Great way to start a Monday and a new week.

-- Jack Krupansky

Friday, October 25, 2013

Start of the Twitter IPO road show - in my neighborhood

I was just watching a CNBC video about the start of the Twitter IPO road show here in NYC. They billed it as a tour of "Wall Street." Then, I noticed that the background when the Twitter guys walked out of a building looked awfully familiar, like on Park Avenue in my neck of the woods. The video panned a little and I knew for sure where it was. In fact, when I went out for my "lunch time" walk around 3 PM I had walked past one of the JPMorgan Chase buildings between 47th and 48th Street and Park Avenue and noticed some media vans and cameras. That's rarely unusual, so I paid little attention. From the video there was a JPM tweet from 2:05 PM, so I probably just missed them. Still, kind of cool that the end of the first day of the Twitter road show was in my neighborhood (I live near 50th and Lexington Avenue.)

-- Jack Krupansky

Twitter red herring from my broker

I logged into one of my brokerage accounts a few minutes ago, checked the IPO list, and lo and behold, there was the Twitter red herring prospectus. It was too late in the day to call them up, but this looks promising. But, even if my broker gets Twitter shares in the IPO, that's not to say that I would get an allocation or very much of an allocation. Still, this is a good sign.
The lead paragraph of my broker's announcement:
Twitter, Inc. is offering 70,000,000 shares of common stock to be listed on the New York Stock Exchange under the symbol "TWTR". Pricing is expected on Wednesday, November 6, 2013 (post-close). The expected pricing will be $17.00 - $20.00 per share.
Monday morning, first thing...
-- Jack Krupansky

Twitter IPO schedule

From Bloomberg:
Twitter will start meeting investors on its road show on Oct. 28, according to a schedule obtained by Bloomberg. The company will make stops in cities including New York, Boston,Chicago, San Francisco, Los Angeles and Denver before ending up back in New York on Nov. 6, the same day the final pricing of the shares is scheduled. Twitter would then start trading on the New York Stock Exchange the next day.
So, that is tentatively the date that Twitter shares will start trading: Thursday, November 7, 2013.
The current expectation for pricing is in the range $17 to $20.

-- Jack Krupansky

Sunday, October 20, 2013

Great advice for the Twitter IPO

I saw this great advice for how to think about the Twitter (TWTR) IPO in a San Francisco Bay Area newspaper:
If you're tempted to invest in the initial offering, do it for the right reasons – that you're in for the long term because you admire what the company does and that you have no illusions of making a quick buck.
So, yes, I will be in it for the long-term. That also means that I'll think twice about how much to put at risk on opening day and at the market on the open.
I've done well with Facebook (FB), but I skipped the opening day, waited a number of months, and got in much more cheaply. That said, nobody expects the Twitter IPO to go as badly as the Facebook IPO. In truth, nobody can predict what will happen. Even if the company and its underwriters do price the IPO "reasonably", nobody can predict how the vast hordes of speculators and traders will react once trading begins. If nothing else, I expect to make follow-on investments whenever any disappointment sets in (any 15% decline from a recent trading peak.)
-- Jack Krupansky

Friday, October 18, 2013

Success with the NY state Obamacare exchange

Wow, I finally succeeded in getting a New York state Obamacare account and application set up so that I am finally able to see plans and prices. The full price range is $307 to $1,121. Bronze plans range from $307 to $407 with a $3,000 deductible. Platinum plans range from $443 to $1,121 with no deductible. Excluding United HealthCare plans, the highest platinum premium is $649 per month.
Until today I had an account that I could log into, but was unable to finish the application process. I had called customer service last week, described the problem, they put me on hold, and reasonably quickly came back and told me that they were aware of the problem, were working on it, but I would just have to try "later".
The problem was that I would log in and if I tried to view plans, the system would simply insist that my application was not complete, give me a button to continue where I left off, but clicking that button simply took me to the last page of the application process where all I could do is initial the application, check the fine print, and then click on the "Finish" button. I would do all of that, but the system would unceremoniously dump me out to the main "Individual" screen and not let me view or select any plans. Rinse and repeat, but no change.
The good news is that the long delays of the first week were resolved. IOW, I could quickly do nothing.
Also, even in the first week, I did not experience any long hold times with customer service.
I tried to complete my application every day, to no avail, but today I called customer service as before, described the problem, and once again they said they were still working on it. But... this time they suggested that I should create a brand new account and try again. Actually, I was going to suggest that myself since I was concerned that the many timeouts in the first few days may have left my account in some unworkable state.
So, I created a new account, which was reasonably fast and pain-free, and everything worked fine. And then I finished the application process and could see plans and prices.
Actually, there is still one glitch – it asks me if my 2014 income will be the same as in 2012 and will only prompt me for my expected 2014 income if I answer "Yes", when the answer is really "No." IOW, they have the yes and no options wired backwards, at least for my scenario.
And, meanwhile, my original "zombie" account is still out there, lifeless but not quite dead.
The real bottom line is that I will continue to be self-insured in 2014 and beyond since the penalty for not carrying insurance is still significantly less than $1,000 less than the penalty. That's the economic rule that I have decided to use.
Although, since I am 59, I'm not too many years away from Medicare.
Meanwhile, I continue to make semi-regular $25 monthly donations to the U.S. Treasury to pay down the federal debt.
BTW, I am thoroughly amused by the extent to which the White House itself has adopted the use of the term "Obamacare." For example, see:

-- Jack Krupansky

Wednesday, October 16, 2013

The Big Day

Okay, this is it... the proverbial "Eleventh Hour" is here. Most sane observers know and expect that a deal will get done. And as I like to always put it, "The fix is in", meaning that the key players already know the parameters for the deal and it's merely a matter of letting all of the political theater play out so that the "far" wings of both parties can justifiably feel that their party "fought" to the bitter end, and then some.
That was the "lesson" of the previous budget negotiations, that the far wings of both parties felt betrayed by their own parties and felt that they caved without fighting hard enough. For better or worse, the leadership of both parties took that "lesson" to heart and played it to the hilt.
In all likelihood, the deal will come together later today.
Sure, there is a faint possibility that a small number of Senators or Congressmen could gum up the works and leave Treasury in a bad position for a day or two, but that's still the unlikely scenario. For example, it may take the House two or three votes over a couple of days to finally get a majority on board (which lets Republicans say that "I voted No before I voted Yes at the end when it was too late and the cause was lost.) And besides, Wall Street is already well prepared to handle any modest, short-term disruption in the Treasury market. A delay in payment of Treasury interest and matured principal would be a mere speed bump, not a "major economic catastrophe". It would be an embarrassment for President Obama more than a problem for Wall Street.
If nothing else, I'm sure that the Fed with its ongoing quantitative easing would be more than happy to buy up any Treasuries that people want to dump. After all, the Fed simply hands over the interest on its Treasury holdings back to Treasury. If anything, the whole process saves the federal government money. And the additional quantitative easing is an additional boost to the economy.
In short, today is very likely the end of the process (other than that any agreement will likely simply kick the can down the road for another confrontation in a few weeks or months), but Wall Street (and the Fed) are ready to deal with the situation if it does take a little bit longer.

-- Jack Krupansky

Twitter will list on the NYSE

Twitter finally decided which exchange to list on. They spurned NASDAQ, which had screwed up the Facebook IPO, and went with the NYSE.
In truth, I think it matters like zero to most retail investors which exchange a stock is listed on. I mean, us retail investors simply enter the ticker symbol and the brokerage server automatically handle the rest.
But if picking the NYSE help make the Twitter IPO go smoother and give Twitter the cachet of a solid company rather than yet another overhyped flash in the pan, so be it. After all, all I care about is getting in at a cheap price and then capitalizing on the fundamental growth of the company over the coming years.
At this point, I'm assuming that the Twitter IPO will occur likely in the second week of November, roughly.

-- Jack Krupansky

More on Wall Street and Treasury Bills

Here's another good article delving into the nuances of the Wall Street and the market for Treasury securities:
"Treasury Paying $120 Billion in Bills Doubted as Fitch Warns"
The actual story is quite a bit less ominous than that headline, although some market participants are rather agitated. As one said, "the bill market will continue to trade choppily and auctions will not go well." Actually, I think the T-bill auctions on Tuesday went a lot better than I would have expected.
There are three more T-bill auctions on Wednesday, for 1-month, 6-month, and 1-year bills. These will all settle on Thursday, October 17th as well.
Actually, all of these auctions should do reasonably well (meaning significantly oversubscribed by a factor or ratio of 2 or more). The perceived problem is not getting paid a month or 6 months or a year down the road, but what happens during the budget/debt negotiations over the next two weeks for bills that were issued in past months, as well as coupon payments for Treasury notes and long-term Treasury bonds.

-- Jack Krupansky

More on Street and "default"

And here's another good article on the nuts and bolts of how Wall Street would see and deal with so-called "default":
""If we slide past the 17th without an agreement to increase the debt limit, it will be bad for the economy for sure, but it won't mean a default," Jim Bianco, president of Bianco Research LLC in Chicago, said by telephone on Oct. 13. "That would set up the most bullish scenario you can imagine for Treasuries, which would be that the economy is collapsing and the Fed is likely throwing even more money at it.""
Jim Bianco is one of the most knowledgeable guys on the planet when it comes to this stuff.
BTW, "the Fed is likely throwing even more money at it" is a Wall Street euphemism for the Fed buying Treasuries.

-- Jack Krupansky

Treasury auction survives the budget impasse

Tuesday was a Treasury auction day. It was interesting to see how market participants value new 3-month T-bills. They auctioned Tuesday and then settle on Thursday, October 17. There are also auctions on Wednesday as well.
See the auction results here, from later in the afternoon:
The 3-month T-bill did have a higher rate of 0.13%, but I say that wasn't so bad, all things considered. The cover ratio of demand to actual bills was somewhat lighter than usual, but still reasonably strong at about 3.13. Specifically, there were bids totaling $109 billion for the $34 billion of T-bills offered.
For Bloomberg coverage of the Auction results:
"T-Bill Rates Surge as Auction Demand Falls Amid Budget Impasse"
The headline and much of the tone of that story is quite severe, but I say the 0.13% rate and cover ratio of 3 is really good news.
For the Treasury report for the actual auction:
Interesting that the Treasury Auctions have been continuing despite the government shutdown.

-- Jack Krupansky

Wall Street and "default"

Here's a good article that explains some of the nitty-gritty of how Wall Street would deal with non-payment of Treasuries during a budget dispute:
Key quote: "A Treasury default would be deemed technical because it would be the result of the government's unwillingness, not its ability, to pay. In a technical default, only the prices of Treasury bonds that mature or have coupon payments would likely fall, according to the analysts. Money-market funds wouldn't be forced to sell government bonds, and the Fed probably would continue accepting them as collateral for emergency cash."
Even better, no real need for Treasury to "prioritize payments". As the article notes, "During the 2011 debt ceiling debate, Treasury officials said delay was the most feasible of bad alternatives, according to a report written by the Treasury's Office of the Inspector General. Under this alternative, no payment would be made until all payments due that day could be paid." As the article also notes, "If the Treasury gives a day's notice on payment delays, that would also prevent the $2.6 trillion-a-day Treasury repurchase agreement market from seizing up, according to JPMorgan." That's about all Treasury has to do – give a day's notice.
In short, not a big problem at all. It's more of an embarrassment problem for Obama that it happened on his watch and under his "leadership" – even if he can blame the Republicans and the Tea Party.
Of course, this is just for a short-term dispute, like days or weeks, not months or years.
A budget/debt deal is still quite likely, but I suppose it is quite possible that the House might feel the need and political advantage of forcing the vote to fail at least once or twice and drag a successful vote out past the October 17 date to force Treasury into "technical default"... just because they can.
So, Treasury may be forced to give its "one day notice" Wednesday morning or 24 hours in advance of whenever its "zero balance" point really is. I mean, the October 17 date was always really just a front for resisting negotiations.

-- Jack Krupansky

Saturday, October 12, 2013

Should I start using twitter again?

Hmmm... now that Twitter is on the verge of a stock IPO that I am interested in as an investor, I'm pondering whether I should start using Twitter again. I "hit pause" on using Twitter back on April 13, 2010, three and a half years ago, having found that it wasn't delivering any real value to me, personally.
Maybe I'll think about it next week.
Me on Twitter ("back in the day"):
Meanwhile, I actually do use Twitter semi-regularly in a passive manner, for searches of recent news, such as for the Twitter IPO itself:

-- Jack Krupansky

Wednesday, October 09, 2013

Twitter IPO on November 15?

Mashable suggests that the Twitter IPO may occur on November 15:
They also report that the S-1 said that non-executive employees could first trade restricted stock on February 15, 2014, which is the first post-IPO hit that the stock could take. They worked backwards 90 days from that reported date to get the November 15 IPO date.
The remaining restricted shares, including executives and directors, would exit from lock-up 91 days after that, which would be May 17, 2014. Expect another hit to the stock around that time. If there is a hit, I'll be ready to buy on any significant dip.

-- Jack Krupansky

A balanced federal budget this month?

Wow, the prospects are truly breathtaking! We may actually see the federal budget become balanced this month without anybody having to lift a finger. If Congress does not raise the federal debt limit, then by definition the the federal budget deficit will become zero, so that the "outlays" of the federal government cannot be greater than its revenues. Just like that, without even requiring the stroke of a pen or the click of a mouse.
Would there be some pain and a possible recession? Sure, the prospects are very real. But the gain from fiscal discipline would be truly awesome. No more deficit. A balanced budget. Just like that.
Would we risk a default on outstanding Treasury debt? Not at all. Not even close. It's really simple math. The president's proposed 2014 budget shows a deficit of $668 billion on expenditures ("outlays") of $3.883 trillion and revenues of $3.215 trillion. That's a deficit of about $55.7 billion a month. That is also the amount of "bills" due every month that Treasury would not be able to pay every month if the debt limit is not raised. That amounts to 17.2% of expenditures or outlays.
IOW, Treasury will be able to pay 82.8% of its bills if the debt limit is not raised. Yes, without Congress or the president doing anything, we can still pay 83% of our "bills".
That should be more  than enough to pay interest and maturing principle on Treasury debt, social security, Medicare, military pay and bullets and bombs (and drones), etc. In fact, a whopping 82.8% of the budgeted outlays. That actually sounds fairly decent to me, and hardly a "The Sky is Falling" scenario that the White House is fear-mongering about.
Still, my personal preference would be a less disruptive $50 billion to $100 billion budget cut in exchange for raising the debt limit. OTOH, the prospect of a balanced budget "in our times" is awfully tantalizing.
An across-the-board 1% spending cut would be a reasonable proposal for the president to make. That amounts to $38.8 billion. A counter proposal of 2%  ($77.6 billion) or 3% ($116.4 billion) would be reasonable proposals by the House.
What about a tax hike to balance the budget? Zero chance the House would go for it. As I said, the House doesn't need to do anything to get something it dearly wants, namely, a balanced budget.
The president is really playing with fire here. By refusing to accept a modest cut in spending he risks having a balanced budget as a fait accompli. OTOH, maybe that is what he secretly wants as well, despite his Progressive Liberal credentials.

-- Jack Krupansky

Tuesday, October 08, 2013

Playing the opening for Twitter IPO

My latest thoughts on playing the open of trading for the Twitter IPO is a mix of limit and market orders:
  1. A market order to buy at the open.
  2. A limit order to buy at 5% above the IPO price.
  3. A limit order to buy at 10% above the IPO price.
  4. A limit order to buy at 15% below the IPO price.
Although, I'm not so sure whether to use the raw IPO price or the "indicating" price shortly before the open.
The market order will guarantee me a position.
The two in-the-money limit orders will guarantee that I stay mostly out if there is a large pop at the open.
The out-of-the-money limit order will get me a larger position if Twitter swoons shortly after the open.
If my limit orders are positioned relative to the IPO price and there is a large pop at the open, I'll open another limit order to buy at 15% below the current price an hour after the open.
Again, these are simply my current thoughts, and they are all subject to change as we slowly inch towards the IPO.
And, again, I'm buying as a long-term, buy-and-hold investor, so I am simply looking to get an attractive entry price here.

-- Jack Krupansky

Monday, October 07, 2013

Twitter IPO Valuation by Prof. Aswath Damodaran

Here's an interesting in-depth look at the valuation for Twitter by Aswath Damodaran, Professor of Finance at the Stern School of Business at NYU:
His bottom line:
... here is how I see Twitter:
at a $6 billion market cap ($10/share), I think it is a very good deal,
at $10 billion ($17.5/share), I am indifferent to it, and
at $20 billion ($35/share), it is a moon shot.
That begs the question of how it would look at $20, $25, $28, $30, and $32 a share. I'll guess that the good professor would say something like "less than attractive, and increasingly less attractive."
Personally, I am at least half-hoping that Twitter does something fairly similar to Facebook and falls off by 20% to 40% in the weeks and months after the IPO. I'll be ready. But I'll buy at least a modest amount on opening day, just in case... Twitter may in fact be a true moon shot. I mean, I do expect them to eventually grow into any initial valuation.
Meanwhile, I'm rather surprised that Facebook (FB) has been holding onto its $50 price in the face of the "difficulties" in Washington.

-- Jack Krupansky

Limit order on Twitter IPO open?

My latest thoughts concerning how I will invest in Twitter for its IPO are:
  1. How much to commit on the first day.
  2. How much to commit on the open.
  3. Whether to use a limit order on the open.
  4. Whether to wait an hour after the open for for all, part, or half of my initial commitment.
  5. Whether to split my opening order into two, half market order and half limit order, or some other split.
To a large extent I will only be able to answer these questions a few minutes or maybe an hour before the open.
Even if I do buy at the open with a market order, I am also leaning towards a tight limit order as well on the odd chance of catching a break if trading whipsaws up and down a lot on the first day.
And I am leaning towards an afternoon buy if the stock swoons on the first day.
And I am leaning towards an additional buy a few days later as the initial frenzy abates.
I also still need to calculate what percentage of my portfolio I want to dedicate to Twitter over the first year (maybe 5%). My current thought is to then commit 10% to 30% of that amount on the first day and the remainder on 15% price dips.
In short, still no final decisions.

-- Jack Krupansky

Sunday, October 06, 2013

Twitter IPO vs. Intel

Hmmm... which is more likely to be a better investment over a one-year holding period, buying Twitter (TWTR) on opening day at the open at market price or the same amount invested in Intel (INTC).
Intel is in the dumps because people fantasize that the PC is dead and that Intel has no future in mobile (and ignoring servers), or so they say. Meanwhile, Intel is paying a 3.9% dividend with a P/E of 12.32.
Could Intel double or rise at least 30% over a year?
Will Twitter be overvalued and overpriced in a year at 30% over its market price at the open on its opening day of the IPO?
And what will the premium be for buying TWTR at the open at market on its IPO opening day? 10%? 20%? 50%? 100%? 120%? One theory is that after the Facebook fiasco, the opening frenzy will be much more subdued, but... who knows.
BTW, my main and unshakeable theory is that no retail investor like me will have a ghost of a chance of actually scoring IPO shares.
Sure, there are plenty of other strategies for buying other than at the open at the market, like waiting an hour or waiting until the afternoon or waiting a few days. Or, doing like I did with Facebook, waiting until it fell under $20. But I am disinclined to bet on lightning striking twice in the same place.
And if you don't like Intel, do the same exercise with any other tech value/comeback stock.
Or even Yahoo (YHOO), which has a P/O ratio of 9.61. I mean, a year ago you could have gotten Yahoo for $16 and it's now at $34. Could it rise more in a year than Twitter from its opening price? Who's to say. I mean, longer term I see Twitter as a better growth play than any of these other plays, but... in the short or medium term, who can say.
Go ahead and try to figure out the answers to any of these questions.

-- Jack Krupansky

Negative chatter about the Twitter IPO

Not all of the chatter about the long-awaited Twitter IPO has been positive. The most common criticisms I've heard are:
  1. Fear of the same fate as the Facebook IPO.
  2. Company is still unprofitable.
  3. Growth may have slowed.
  4. Haven't done well enough with mobile advertising.
And the list goes on.
Actually, I personally view all of these negative criticisms as a positive. They would be a negative if I was an insider looking to cash out, but I'm not. Instead, I am a public investor who would like to get into the stock at the lowest possible price. The more negatives (well, perceived negatives) the better.
In truth, a lot of the negativity comes from the perma-bears of Wall Street and the tech sector who always look at almost everything with the most negative possible perspective. So, my real concern is that the average punter looking to lay a bet on the Twitter IPO may not pay too much attention at all to the perma-bear criticism which amounts to a bunch of old dogs whose barks are far worse than their bites.
So, we will be faced with three scenarios:
  1. The negativity does materialize and scare people away, leading to a much lower offering price.
  2. The negativity fades away and we face a steep premium for the offering price.
  3. The company and underwriters blow off the criticisms and grossly overprice the offering.
We have two distinct factors for the offering:
  1. The offering price.
  2. Degree of demand on the aftermarket.
Those two factors are independent, in theory, but can interact. A grossly overpriced offering, ala Facebook, can in fact crush aftermarket demand.
On the flip side, a grossly underpriced offering could spike demand, but if everybody believes that the offering in underpriced to match week financial fundamentals, that could spook a lot of investors and the aftermarket could fizzle.
Given the fear of a repetition of the Facebook IPO fiasco, the company is unlikely to grossly overprice the offering.
And even the data we already know about the company strongly suggests that a really weak offering is very unlikely.
In short, the offering is likely to be priced moderately and attractively.
But, none of this tells us anything at all about aftermarket demand. I personally am a buy-and-hold investor, but there are lots of very short-term traders and speculators out there who will be looking only for a spike on opening day.
A medium-term concern is insider sales on expiration of lockups for restricted stock. That's a reality. Sure, there might be a dip on each lockup expiration, but for long-term investors such as me those will be buying opportunities.

-- Jack Krupansky

Friday, October 04, 2013

Twitter IPO S-1 filing

Okay, finally, here is the Form S-1 filing for the Twitter IPO. It certainly contains a lot of interesting information, but does not include the offering share price or number of shares to be offered.
It opens with this statement:

This is an initial public offering of shares of common stock of Twitter, Inc.

Prior to this offering, there has been no public market for the common stock. It is currently estimated that the initial public offering price per share will be between $         and $        . We intend to list the common stock on the              under the symbol "TWTR".

We are an "emerging growth company" as defined under the federal securities laws and, as such, may elect to comply with certain reduced public company reporting requirements for future filings.

There they give the ticker symbol as "TWTR", but no stock exchanged its specified yet. Note the blank space for price range and exchange.
The Prospectus Summary starts with:


Twitter is a global platform for public self-expression and conversation in real time. By developing a fundamentally new way for people to create, distribute and discover content, we have democratized content creation and distribution, enabling any voice to echo around the world instantly and unfiltered.

Our platform is unique in its simplicity: Tweets are limited to 140 characters of text. This constraint makes it easy for anyone to quickly create, distribute and discover content that is consistent across our platform and optimized for mobile devices. As a result, Tweets drive a high velocity of information exchange that makes Twitter uniquely "live." We aim to become an indispensable daily companion to live human experiences.

People are at the heart of Twitter. We have already achieved significant global scale, and we continue to grow. We have more than 215 million monthly active users, or MAUs, and more than 100 million daily active users, spanning nearly every country. Our users include millions of people from around the world, as well as influential individuals and organizations, such as world leaders, government officials, celebrities, athletes, journalists, sports teams, media outlets and brands. Our users create approximately 500 million Tweets every day.

Twitter is a public, real-time platform where any user can create a Tweet and any user can follow other users. We do not impose restrictions on whom a user can follow, which greatly enhances the breadth and depth of available content and allows users to discover the content they care about most. Additionally, users can be followed by thousands or millions of other users without requiring a reciprocal relationship, enhancing the ability of our users to reach a broad audience. The public nature of our platform allows us and others to extend the reach of Twitter content beyond our properties. Media outlets distribute Tweets beyond our properties to complement their content by making it more timely, relevant and comprehensive. Tweets have appeared on over one million third-party websites, and in the second quarter of 2013 there were approximately 30 billion online impressions of Tweets off of our properties.

Twitter provides a compelling and efficient way for people to stay informed about their interests, discover what is happening in their world right now and interact directly with each other. We enable the timely creation and distribution of ideas and information among people and organizations at a local and global scale. Our platform allows users to browse through Tweets quickly and explore content more deeply through links, photos, media and other applications that can be attached to each Tweet. As a result, when events happen in the world, whether planned, like sporting events and television shows, or unplanned, like natural disasters and political revolutions, the digital experience of those events happens in real time on Twitter. People can communicate with each other during these events as they occur, creating powerful shared experiences.

My understanding is that it will be at least three more weeks before Twitter can start the road show. I'm not sure how much longer after that before trading opens, but I read that they were expecting that it would occur before Thanksgiving.
Stay tuned for further details.
-- Jack Krupansky

Wednesday, October 02, 2013

The budget crisis end game

Despite all of the political theater and gnashing of teeth and wringing of hands, the end game for the current federal budget crisis in the House is quite simple. Boehner knows how to read the writing on the wall, what the future holds, but he also must pay allegiance to the here and now reality in front of his nose. In other words, he needs to let the rebels run until they feel like they have achieved a moral victory, and once they have exhausted all of their ideas, Boehner can then afford to stand up and say "Okay, we held our ground and put up a good fight, but we just don't have the votes in this congressional cycle, so we need to acknowledge the reality of today and work towards a better future in 2014" – or something like that.
IOW, if Boehner tries to quash his rebels too early, he loses badly, but if he lets them learn from experience that they "don't have the votes and can't get them", then he wins both by letting them have their moral victory and being a respectful leader.
I expect that the rebels will have exhausted their limited legislative quiver within one or two or three days.
The debt limit? That's a completely different saga, but I expect it to be resolved by the conservatives forcing Obama to agree to another $100 billion in expenditure cuts. IOW, yes, the debt limit must and will be raised, but Obama needs to concede that the deficit is still way out of control. And Obama doesn't have the leverage to force a tax hike.

-- Jack Krupansky