Twitter has gone public. That is to say, a number of Twitter shares owned by founders and early financial supporters--70 million or about ten percent of total shares--have been privately sold to clients of the underwriter, Goldman Sacks, at a fixed, pre-arranged price of $26 per share and then those shares were sold to the public in the public market for $45 per share. Goldman was paid $22 million to put this all together---and were given the right to buy 10 million Twitter shares at $26 per share and sell them the next day for $45.
So the founders of this revolutionary company, following Goldman's expert advice on the inherent value of their shares, agree to sell 70 million shares of their company to Goldman's clients--and 10 million more to Goldman itself--for $26 a share. The Goldman clients--and Goldman--then move their shares to the public exchange and sell them to the public for $46.
Goldman's clients do well, Goldman does well, but the company's founders sell their shares at $26 (at Goldman's expert $22 million suggestion), $20 less than valued by the public market when they are available.
Does this sound reasonable?
And how does Goldman get to represent both buyers and sellers--and themselves in the bargain? And how could their expert estimate of the value of the company shares be so wrong?
Does any of this sound reasonable?
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