Yeshiva University students may be able to buy a piece of Twitter, although many are unaware of the opportunity.
Twitter, Inc. is scheduled to have its Initial Public Offering this month. If you are like one of the several YU students I’ve spoken to, you are probably unaware of this, or aren’t even interested. You might not even know what an Initial Public Offering is.
An Initial Public Offering, or an IPO, is the first time a privately held company makes its stock available to the public for purchase. A stock is basically a piece, or a share, of the company. Once a company releases its stock to the public, generally any person can purchase a share of the company (including you).
People buy shares of the company generally because they hope to make a profit from it. A way to make profit is by buying the stock at a low price (for example, at $5) and then selling it for a higher price (at $10).
An IPO is a way for a company to quickly make a lot of cash. When people buy the stock, the money goes to the company, and the company can use that money to expand. The company itself chooses how much money they want to raise, and an investment bank (or several investment banks, if the IPO is large enough), act as the underwriter. Underwriting means conducting the process of the IPO, which includes assessing how much the public will be willing to spend on a share. For Twitter, Goldman Sachs is the investment bank of choice, and one billion dollars is the amount they hope to raise.
The company first announced its plans to go public back in September, and with it came an explosion of interest and debate in the business world. Much of this discussion revolved around whether Twitter’s IPO would flop like Facebook’s did.
Facebook’s much anticipated IPO took place on May 28, 2012, and was a tremendous disappointment. Its stock dropped from $38 to $20 in just a few short months, surprising many hopeful investors.
At TechCrunch 2013, Facebook founder and CEO Mark Zuckerberg was asked what advice he could offer for Twitter. He answered: “I’m kind of like the least…person you would want to ask … [about] how to make a smooth IPO” (laughs).
When asked their opinion on the IPO, most Stern and Syms students are apathetic, skeptical, and/or both.
Physics major Gaby Elkaim (Stern ‘14) is no exception.
“Twitter is similar to Facebook (in that they are both social media websites funded solely through advertisers), and I would expect based on precedence that it will have a similar outcome as Facebook. I don’t know what will happen, I just know what has happened,” she says.
“Here’s the catch, though: I don’t care,” Elkaim adds.
Other students, while still apathetic, are slightly more hopeful. “Twitter will probably learn from Facebook’s mistakes. Because of that, there is a good chance that they will do well,” says optimistic accounting major, Sima Weissman (Syms ‘15).
Much of Twitters’ success is dependent on the public’s attitude towards the company. The more people like the company, the more people will buy its stock, and the higher the stock price will rise. In contrast, the less people like the company, the less people will buy the stock, and the lower the stock price will drop. The stock price may even go below its original cost, causing people to lose money.
Either YU students may be missing a pot of gold, or their ignorance may be helping them avoid another disappointment.