Twitter Inc. fell 7.2 percent Friday, erasing some of the euphoria that caused shares of the short-messaging site to almost double at their market debut.
Twitter, which raised $2.09 billion in its initial public offering, declined to $41.65 at the close in New York from Thursday’s close of $44.90. Friday marked the company’s first full day of trading after setting an IPO price of $26.
The San Francisco-based company spent the last two weeks pitching investors on the stock’s potential for growth, as it seeks ways to generating more advertising to its 230 million users. Thursday’s closing price valued Twitter at 22 times estimated 2014 sales, more expensive than Facebook Inc., which traded at 11.2 times sales. It was the largest technology IPO since Facebook debuted last year.
“The market still has to settle in,” said Brian Wieser, an analyst at Pivotal Research Group LLC in New York who has a sell rating on Twitter. “It was obviously a very successful IPO, but over time people are going to be looking at valuations, and those assessments will increasingly weigh on minds.”
The IPO, led by Goldman Sachs Group Inc., valued Twitter at $14.2 billion. After retreating from the 73 percent rally on the first partial trading day, it now has a market capitalization of $23.6 billion. Twitter, while unprofitable, is benefiting from investors’ thirst for companies that will grow quickly in expanding markets like mobile advertising. Twitter draws 70 percent of revenue from mobile advertising, compared with about half for Facebook.