Today: Santa Clara University professor says Twitter will likely look at acquisitions, secondary offering after its IPO leads to a booming stock price. Also: Tesla falls after another Model S fire, SolarCity suffers after earnings report.
The Lead: Twitter moves up to land of tech big boys with funds from IPO
With up to $2 billion flooding into the social network's coffers, Twitter has options galore on the road ahead. BizBreak chatted with Robert Hendershott, Santa Clara University finance professor and private equity expert, about what will be next for the social network after the transition from private to public company.
"Twitter is following a very proven and time-tested task. They are using the IPO as what is likely to be their last financing round," Hendershott said Thursday.
With the funds collected, Twitter now plays with the big boys of the technology sector.
"The IPO raises a war chest that they want to compete with the Microsofts, the Googles, the Facebooks of the world for new ideas, talent, acquisitions, whatever opportunity might come down the pipe," the professor said Thursday in a telephone interview.
Twitter has already been active with acquisitions while doubling its workforce to more than 2,000 employees over the past year, many of whom showed up early to celebrate Thursday's achievement. But many of those purchases were smaller than the talent grabs competitors such as Facebook -- which famously paid $1 billion for Instagram -- could accomplish.
"Twitter has been inquisitive, but now they have a public currency and a big slug of cash," which makes them more of a competitor, Hendershott said.
But that doesn't mean Twitter's going to run out and start laying down big bids on other companies tomorrow.
"I would expect them to sit on it and wait for the right opportunity to come along. This is the first time they've had billions of dollars in cash to compete with, say, Facebook for Pinterest," Hendershott said, qualifying his statement by saying a battle with Facebook for Pinterest was just an example off the top of his head, not an upcoming reality.
"But if you were to spend that money at once, spend a billion or two on acquisitions, it puts them right back to where they were a month ago, without the war chest that gives them options," he added.
A more likely follow-up to Twitter's IPO will be a secondary offering that allows employees and early investors to "cash out." Hendershott compared Twitter's IPO to that of San Jose-based eBay (EBAY), explaining that eBay also used its IPO as a financing engine, then came back with a secondary offering six months later in which stakeholders sold their shares to the public at the going rate.
"That is the traditional route, and given how traditional Twitter has been -- they have done the IPO by the book -- I would expect" Twitter to exercise a secondary offering in six months to a year, Hendershott said.
Other than possible acquisitions or a secondary offering, Hendershott believes little will change for Twitter beyond the regulatory and administrative burdens of being a public company.
"Although they are a public company today, where they were a private company yesterday, it does not change the trajectory of them as a technology startup," Hendershott said.
SV150 market report: Tesla, SolarCity among companies hurt on tough day for stocks
While Twitter was flying high Thursday, the rest of Wall Street was declining as investors feared the Federal Reserve would cut back on its stimulus after the Commerce Department reported strong economic growth for the United States in the summer quarter. Technology stocks suffered a large hit in Thursday's sell-off, with the Nasdaq clocking the largest decline of the three major U.S. stock indexes, declining 1.9 percent, and SIlicon Valley stocks following a similar path.
Tesla Motors (TSLA) continued a decline that started Wednesday as a result of its Tuesday earnings report, but many observers attributed Thursday's weakness to another car fire involving a Model S. The Palo Alto company confirmed that one of its electric cars caught on fire in Tennessee, which follows a Model S fire in Washington and one in Mexico, creating concerns that the cars could be susceptible to fires in the case of collisions. Tesla stock fell 7.4 percent to $139.91, its lowest closing price since mid-August.
Tesla CEO Elon Musk's other Silicon Valley company, San Mateo-based SolarCity, suffered its own post-earnings dive Thursday, declining 16.7 percent to $49.69, the largest percentage decline in the SV150 Thursday. The residential solar installation company beat Wall Street expectations for the third quarter in a Wednesday afternoon report, but forecast a larger loss in the final three months of the year than Wall Street analysts expected. Thursday's biggest SIlicon Valley earnings report was San ta Clara chipmaker Nvidia, which met expectations and included news that the company would boost its dividend and expand a stock-repurchase program. Nvidia shares lost 2.4 percent to $14.55 in regular trading Thursday, but regained all that it lost during after-hours trading.
Silicon Valley's social-media companies couldn't follow Twitter to gains, either: Facebook dropped 3.2 percent to $47.56 while announcing a new office near the campus where the social network began, LinkedIn fell 4.2 percent to $211.47, Zynga dropped 6.6 percent to $3.46, and Yelp continued a recent slide with a 7.2 percent decline to $61.83. Netflix (NFLX) dropped 2.6 percent to $326.86 as the Los Gatos video-on-demand company announced a Marvel team-up that will lead to original programming featuring some of the comic book publisher's popular superheroes. Apple (AAPL) dropped 1.6 percent to $512.49, Google (GOOG) fell 1.5 percent to $1,007.95, and Adobe (ADBE) fell 3.1 percent to $53.17 while giving customers a chance to find out if their account info was accessed in a recent cyberattack.
Up: NetApp, Intuitive Surgical, Hewlett-Packard
Down: SolarCity, SunPower (SPWRA), Tesla, Yelp, Zynga, LinkedIn, Pandora, Facebook, Adobe, Applied Materials, Workday, Netflix, Gilead, Nvidia, Yahoo (YHOO), SanDisk, Apple, Salesforce, EA., Google, eBay
The SV150 index of Silicon Valley's largest tech companies: Down 22.22, or 1.58 percent, to 1,381.57
The tech-heavy Nasdaq composite index: Down 74.62, or 1.9 percent, to 3,857.33
The blue chip Dow Jones industrial average: Down 152.9, or 0.97 percent, to 15,593.98
And the widely watched Standard & Poor's 500 index: Down 23.34, or 1.32 percent, to 1,747.15
Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/jowens510.