[Tyrannosaurs]

The owners of Twitter prior to the flotation have basically sold a chunk of what they owned on the stock market. To do that they needed to put a value on those shares. Determining that price is pretty tricky but through one mechanism or another they settled on $26 a share.

The fact that people are now willing to buy them for $46 a share suggests that they basically sold them at too low a price (arguably $20 a share too low).

In doing so they've lost out on a fair bit of money. Establishing a value ahead of the flotation is difficult and often companies will err on the side of caution (that is sell slightly cheap) to make the sell off look like a success, but I think it's being suggested that this gap is too big to just be that and that some of the previous owners may be unhappy that they've lost out.

[pfortuny]

I understand what you mean by "they lost out a fair bit of money". However, that is not exactly true.

They have failed to gain that (admittedly huge) chunk of dollars but they have lost nothing: the have the same money they started with and they never had any more than that. You only lose when you start with X and end up with X-Y, for positive Y.

They have probably missed the opportunity to gain more but that is their mistake (if it is a mistake).

[hyperpape]

Well, two days ago, they owned n shares of assets that were sellable for $46 a share. Now they have n * 26.

They lost out, just as if I took your $20k new car and gave you $10k, you'd have lost out even though you have more cash.

[pfortuny]

Did that information exist two days ago? Because if it did not exist, then there was no real $46 value. No REAL market (which is the place where information on value is) implies no monetary value (or a worthless one).

What happens is that they did not guess (and this is an important term, there is no inherent value in a guess) TODAY'S market's expectations correctly. But that has little to do with true monetary loss or gain.

Of course, their expectations today might be crushed. But personal expectations and hopes are not valuable as shares are.

[hyperpape]

"REAL". I think it's a lot less clear what that means in this context than you apparently do.

[pfortuny]

That there were explicit people explicitly willing to buy those shares at that price. Exactly that. The explicit term is quite important. Secret information is not part of the market (it is not market information).

[Tyrannosaurs]

Agreed, I should probably have said "there is a feeling they might have missed out on a lot of money".

It's not clear cut but the share price hitting $46 suggests that they could have floated successful at a higher price.

[pfortuny]

Absolutely true. However, markets are not that easily understood and implicit expectations are quite difficult to assess.

My opinion is that if they had not gone public, nobody would have bought their shares for $46 each. But this is a worthless statement :)

[bcoates]

By that logic a random-trading machine that never bought the same security twice would never lose anything, despite reliably winding up with a very worthless portfolio.

[pfortuny]

No, because you lose value, not shares. So X and Y are measured in $$ not in shares.

[mpclark]

Surely the price is only half the equation, and you have to consider the volume too?

Could it not be the case that while they could find buyers for some of the shares at $46, they could only guarantee selling all of the shares at $26?