Twitter’s stock is up more than 6% today, taking it to an all-time high of $US74.73.
Twitter priced its IPO at $US26 in early November. If you were one of the lucky people to invest, you’ve see the stock nearly triple.
Even if you were a guy on the street that had to buy it on the first day of trading, you’re not doing too poorly. It opened for trading at $US45.10, and closed the day at $US44.90.
It’s been a crazy week for Twitter. On Monday the stock was up 7%. On Tuesday it was up 8%.
So, what is driving the stock? Twitter has made no new announcements in a while. There’s been no big news on the company. And yet, in the last week, it’s up 33%.
We asked around and here’s one explanation we heard from someone that watches the stock closely, but didn’t want to be quoted for professional reasons.
This is an end of the year rally that could be happening because funds want to own some Twitter stock for their portfolio. This way, when they meet with their clients, they can say they own some Twitter, which has exploded into a hot stock.
Another possibility, which we’ve heard in the past is that it’s supply and demand. There is a tight supply of Twitter stock relative to demand, which is driving up the price of the company.
There’s also the idea that it’s a short-squeeze.
Whatever the case may be, people seem to think this is “technical” and not “fundamental.” And they think there could be a correction coming at the start of January when the end of year trading closes.
It’s possible Twitter is the new hot momentum stock that everyone is riding.
Or maybe people just think that Twitter is going to be a massive, Facebook-sized business, and they think this a good opportunity to buy in.
Obviously, we don’t really know, and none of the explanations are satisfying.
Sometimes, it takes a while for an explanation to form.
(Remember this time last year Apple was crashing and everyone was trying to figure out why, before ultimately settling on the fact that EPS targets were too high. Likewise, something could be happening with Twitter. Maybe estimates are about to get jacked up to the moon. Maybe advertisers are squawking to all their friends and family over egg nog about how amazing Twitter is, and how they plan to dump 60% of their ad budget into Twitter next year. Who knows? Something is happening with Twitter. And while you try to figure it out, someone else is making money. Investing! It’s a tough racket.)
If you’re a buyer, email us or drop a note in the comments about what you’re thinking.