Maggie: One of the world’s favorite social media companies has got major financial news that is kind of a ‘hashtag’ big deal. So, Shelby Holliday went to the floor of the stock exchange to find out why everyone is talking Twitter in today’s Generation Money.
Shelby: Are you on Twitter?
Teen: I am. Yes.
Shelby: With 230 million users sending 500 million tweets every day, Twitter is no stranger to the social media spotlight.
Craig Huber: Even my grandma’s on Twitter! So everyone’s on Twitter right now.
Shelby: But today, all eyes are on the social network for a different reason. There is a big Twitter event taking place on Wall Street.
There is so much buzz about the Twitter IPO.
Scott Cutler: It’s extremely high profile. The world’s going to be watching this transaction. There is so much excitement about the company and about the transaction itself.
Shelby: In what is called an initial public offering, or IPO, Twitter will go from being a private company, owned by just a handful of people, to a public company, meaning people like you and me can buy pieces of Twitter, known as shares, on the New York Stock Exchange.
And anyone can buy a share?
Cutler: Anybody can buy a share in connection with the IPO.
Shelby: But why would Twitter want to sell parts of the company to the general public? Because selling shares on a stock exchange can help companies raise a whole lot of money which is used to pay employees, fund research and development, and eventually help the company grow bigger and stronger over time. In today’s IPO, Twitter hopes to sell 70 million shares for about $26 each.
Cutler: The pricing of an IPO is no different than an auction on eBay.
Shelby: So, it is kind of about matching.
Cutler: It’s literally a matching between a buyer and a seller, but on a massive scale.
Shelby: If things go well, Twitter could raise more than a billion dollars. But investors won’t just be focused on the initial public offering. They will also be concerned about Twitter’s ability to make money in the long term. That is because people who own shares of a company get a share of that company’s profits.
So, long-term matters?
Cutler: Long-term is the only thing that matters.
Shelby: Right now, Twitter is actually losing money, which has a lot of people skeptical about the social network’s future. But Twitter says that by selling more online ads, like promoted tweets, trends and accounts, they can turn things around.
Would you say that Twitter’s advertisers effectively reach young people?
Easton Mayordomo: I think they do because regardless of whether you follow them or not, it’s going to show up on your Twitter line.
Elena Davis: Half the time, I don’t click on them because I think they’re annoying. So I’m not really into that thing.
Shelby: So they have the opposite effect sometimes?
Elena: Kind of, yeah.
Shelby: The company also says it can make money by boosting mobile ad sales and by partnering with media and entertainment companies to promote events and TV shows. But the success of Twitter’s strategy, and its future as a company, could depend on young people, Twitter’s biggest user base.
So, do you think Twitter has staying power with young people or do you think they will switch to the next Instagram, the next big social network?
Holleigh Thomason: Quite honestly, I think everything technology-wise, application-wise is just a phase.
Easton: It definitely has a lot of staying power and it’s growing with older people too.
JB: I’d ask the Myspace people, right? I think it’s when something else comes along that’s more user-friendly, more vogue. Then they’ll throw away the old and in with the new.
Shelby: Shelby Holliday, Channel One News.
Maggie: If you have more questions about Twitter’s IPO, well, you can tweet them our way at Channel One News. And make sure to check out Shelby’s blog post over at Channelone.com.