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Twitter brings IPO show to Boston, but buzz is muted

A contrast with Facebook: When Twitter’s CEO, Dick Costolo, talked to bankers and investors, he wore a suit jacket.

A contrast with Facebook: When Twitter’s CEO, Dick Costolo, talked to bankers and investors, he wore a suit jacket.

Twitter is no Facebook. There’s no celebrity founder, no Hollywood film lionizing its early days, no lines of adoring investors trying to squeeze into the presentations the company is holding ahead of its initial public offering of stock.

And that might not be a bad thing.

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Even though Facebook Inc.’s initial offering generated the sort of excitement normally reserved for rock stars, its stock tanked right out of the gate — disappointing hundreds of investors and prompting some to fire back with lawsuits against the company and its underwriters.

After that experience, many investors, especially retail investors who helped create the frenzy and drive up stock prices, aren’t clamoring for a piece of the next big social media stock.

“The retail investor feels like they got burned,” said Michael Mullaney, chief investment officer at Fiduciary Trust Co., a wealth-management firm in Boston. As a result, he said, “interest in Twitter is way down on the Richter scale, compared with what was happening with Facebook.”

The contrast between the two social media companies’ initial stock offerings could not be more stark as Twitter Inc. travels around the country on its pre-IPO roadshow, when executives make the case to investors that the company is worth buying into.

It arrived in Boston Thursday at an invitation-only luncheon at the Boston Harbor Hotel. The meeting drew many investors from local financial institutions and appeared to be fairly well attended, but lacked the media frenzy, buzz, and crowds that Facebook attracted when it came to town in May 2012 to court investors.

A Contrast with Facebook

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It was a similar scene in New York.

While Twitter’s meetings generated plenty of interest, it wasn’t the sort of circus that awaited Facebook and its famous young founder, Mark Zuckerberg. And when Twitter’s chief executive, Dick Costolo, talked to bankers and investors, he wore a suit jacket. Zuckerberg didn’t change out of his T-shirt and hoodie.

Twitter’s offering is also more modest. While Facebook raised $16 billion with its IPO, Twitter is looking to raise $1.4 billion. Still, it’s expected to be the biggest public debut for a Web company since Facebook’s offering.

Twitter is expected to price its shares as early as next week between $17 and $20, which would value the company in the neighborhood of $10 billion.

Facebook priced at $38, and its stock plummeted a few months later to $17.58. It has since rebounded, and this week, propelled by strong earnings, it was at $50.21, valuing the company at $122 billion.

The other key difference between the two social media darlings comes down to profit: One has one, the other doesn’t. Facebook made about $1 billion in the year before its IPO date, while Twitter lost about $80 million last year.

“At least Facebook was profitable when they went public,” said Brian Hamilton, chairman of Sageworks, a financial research firm.

He’s one of many analysts who argue that at a $10 billion valuation, Twitter is overpriced. “We’re presented with yet another over-hyped, over-valued, high-profile tech stock,” he said.

But other potential investors are convinced that Twitter is positioned to do well on the market, and that its valuation is not out of whack, considering the widespread use of the network and its potential for growth.

“We are looking at it for our portfolio,” said Kathleen Smith, principal of Renaissance Capital, an IPO research and investment firm.

“Facebook was making money, but the issue Facebook had was they weren’t doing anything with mobile.”

In the case of Twitter, she said, “They have mobile baked, but it is going public earlier in its evolution.”

And while it may want to appear different from Facebook, as well as other social networks that have struggled in the market, those differences go only so far for investors.

“You can’t help but compare Twitter with Facebook,” she said. “It’s still another social networking company.”

Michael B. Farrell
can be reached at michael.farrell@ globe.com.
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