Readers do not need to be reminded that any analyst who issues an upgrade, downgrade or new coverage this early was not in the underwriting syndicate. That means that they may not directly have any influence over a single share when it comes to buyers or sellers already in the stock.
The downgrade came from a boutique called Pivotal Research. The firm’s Brian Weiser issued a downside alert target price of $30 for the stock. This is still above the $26 formal offering price, but that is down one-third lower than the opening price of $45.10.
Bloomberg TV hosted Brian Weiser about the analyst downgrade on Twitter. Twitter’s $30 price target was meant as a readjustment to the market cap, based on a relative value basis to other media and Internet shares. The report was said to be published a short time ago.
As of noon, we have seen 72 million shares trade hands in Twitter. The real issue to consider is that, of the 70 million shares in the offering, we were told by a trader who was allocated shares that close to 50 million of that float was placed in institutional hands that are likely to hold shares longer.
Whether a 75% gain in a day will force a fund to hold has yet to be seen. We would also assume that the overallotment allocation is a shoo-in to increase the total float closer to 80 million shares. This is one of those IPOs where we would not be surprised to see volatility continue.
UPDATE at 4:00 PM CLOSING BELL: Twitter shares have closed up 72% at $44.90 with 117 million shares trading hands without counting the after-hours trading session shares. The closing first day’s full trading range was $44.00 to $50.09. We would treat this first analyst downgrades as a one-off at this point until more analyst calls are seen, but we would also point out that one trader who was awarded shares at the IPO price told us that some hedge funds and trading firms are already looking for ways to borrow the stock. In short, they are looking on how to short sell Twitter.
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