[c2]

It seems like the trend lately is to float a tiny amount of shares to the public. From my perspective this creates an artificial supply problem for the stock and makes higher valuations easier as you need less institutional buy in to maintain the price, and a few good quarters can result in disproportionate gains in the market.

Can anyone comment on that or shed some light? As a potential investor, those factors make me shy away from these investments as it makes the stock more volatile to changes and puts the fate of the stock in a few large holders hands.

[ChuckMcM]

It worked really really well for Groupon. (Well for their key stockholders at least). But this is the key ...

As a potential investor, those factors make me shy away from these investments as it makes the stock more volatile to changes and puts the fate of the stock in a few large holders hands.

Good, you're being smart about it. Not everyone will be, there will be a number of people who say "Gee, Twitter is everywhere this is going to be a huge stock some day." and will jump in with both feet. Betting with their feelings rather than an analysis of the fundamentals. For someone to 'win big' you either need someone to 'lose big' or a lot of people to 'lose somewhat.' Once there is enough float for the market to balance out the real expectation of the company will emerge (positive or negative).

As a potential investor I think buying it at $10 is probably reasonable and re-selling when it gets back to $20.

[encoderer]

I don't think many companies see volatility as a good thing. Market makers, yes. Analysts, maybe. But companies and officers?

There is certainly a psychological sweet-spot for IPO pricing, between $10 and $20 a share. You've seen recent IPOs do reverse splits before going public -- Yelp did a 1:4, Trulia a 1:3, etc -- in order to arrive at an offering price in this range.

I don't think it needs to be any more complicated than that?

[cft]

This is because all that the insiders need is to make their private shares public, i.e. liquid (notwithstanding officer's planned sales/insider restrictions). Potential liquidity of the insider's shares is the primary objective of a modern internet IPO, like Twitter's.

[encoderer]

I respectfully disagree. At a company like Twitter, the so-called "insiders" have been able to take plenty of money off the table. And in fact, I'm not totally sure what share (if any) of the offering is from shares held by officers and investors. Have you seen the data?

Moreover, there is liquidity on the secondary market for Twitter like there was for FB, etc.

I think the primary object here is to raise capital and lubricate M&A activity. And most companies have no secondary market, so an IPO really helps unlock value for the rank-and-file who aren't part of the Series-XYZ rounds. There are a lot of engineers and middle managers there who will be able to buy homes and lots of other nice toys not to mention diversify their net worth a little.

[bcherry]

RSU grants given to employees (including large grants given to new executives and key employees) are typically illiquid until 6 months following an IPO. The company has to IPO to make good on the compensation given to hire and retain their employees. If they never go public, employee compensation is worthless, and they cannot hire nor retain the best people.

[encoderer]

Most often pre-IPO companies grant options not RSUs. And the lock-up period is a post IPO lockup designed to stabilize the price of a newly offered security while it finds its market.

The existence of a lock up period does not inhibit pre-ipo trading on the secondary market, though to be clear there is no truly liquid "secondary market" for most companies.

[bickfordb]

It may also be the case that Twitter doesn't need to raise more money.

[waps]

You could take it as another sign that the bubble is ending. If a company like twitter needs to do this to get valuation ...