Twitter (NYSE:TWTR) will need to trade up more than 60% on Thursday for greymarket traders to make money.
Retail forex brokers plan to make a lot of money around Twitter’s IPO and the event of Twitter becoming a public company. But how about the Twitter greymarket traders?
After many months of anticipation and (seemingly endless) talk and analysis in the financial media, social networking website Twitter finally priced its IPO on Wednesday, selling 70 million shares at $26 per share, raising $1.82 billion.
Twitter shares will begin trading on the NYSE on Thursday, under the ticker symbol TWTR.
With 544.7 million shares outstanding after the IPO, a $26 share price means that Twitter’s official IPO valuation is $14.2 billion. And it also means that the moment of truth has arrived for those trading Twitter in the pre-IPO greymarket. For example, at UK spreadbetting firm IG.com, greymarket trading will settle based on Twitter’s market capitalization at the end of the first day of trading (i.e. today), rounded to the nearest million dollars.
So what does the Twitter greymarket say on the eve of pricing?
As of Thursday morning, the Twitter sell-buy spread at IG.com was hovering at around $21-23 billion — meaning that greymarket traders buying in at $23 billion were betting that Twitter will rise at least 62% on Thursday. a tall order, even for a ‘hot’ IPO. Note that the greymarket valuation is down somewhat from its peak last week, at about $30-32 billion.
Reports are that Twitter’s IPO was anywhere between 10-30 times oversubscribed at the $26 price, so anything is certainly possible in Day 1 of trading Thursday if all that ‘pent up demand’ actually shows up to buy in the aftermarket.
Either way, forex brokers are looking to cash on in traders’ sure heavy demand to trade Twitter shares, and the high volatility in its shares which is sure to occur, at least in the first few days and weeks after the IPO. Some retail forex brokers are beginning to heavily market Twitter Trading to their mostly retail client base. Two examples follow, from AvaTrade and Markets.com.
To see the latest version of Twitter’s IPO prospectus click here.
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