SOCIAL media colossus Twitter priced its initial public offering (IPO) at $26 (£16.17) per share late last night, ready to float today on the New York Stock Exchange (NYSE).
The pricing is a dollar higher than the upper range of the previous attempt to value the company, and suggests a total valuation for Twitter of about $18bn.
Earlier this month Twitter announced that it was planning to sell 70m shares at $17 to $20 each, but lifted the price in response to buoyant demand. The price was then boosted to $23-25 per share, implying a market valuation of about $17.4bn, before yesterday’s hike.
Grey market trading on IG Index’s market during the middle of October suggested that the company could be valued at closer to $30bn.
Leaving aside the merits (or demerits) of investing in a company which has yet to make any profits, there is a structural barrier to successful investment in US shares. If you buy shares in a UK-listed company, you only need to worry about whether the price will rise or fall; the value of the shares need only rise by enough to cover the fixed acquisition costs (stamp duty and admin fees) in order for you to make a profit. Buying American shares is a trickier business: the pounds you use for share purchase need to be converted into dollars, a process which cost you up to one or two per cent of their value, and you will face a similar cost after selling the shares when converting back into sterling. That alone adds substantially to the difficulty of securing a profit. You also need to keep an eye on the movement in exchange rates; the value of the shares may rise but this may be obliterated if the dollar pound rate moves the wrong way.
Of course, you may choose to open a trading account in the US and deal in dollars on a longer-term basis. But, if your home currency is essentially the pound sterling, who needs all the hassle?
Nevertheless, I did give it a try (once) and bought some shares in Amazon. I was lucky and emerged with a small profit. But I resolved to stick to UK-listed shares in future.