The process of an initial public offering starts when a firm or a company decides that it needs more cash and it turns to the public investing to raise money. Usually the company hires an investment bank to guide it through this process. The company opens its finical status and its books to the publics and regulators, taking its business plan on the roadshow. Finally, it sets an initial stock price and a date for the first day of trading, Twitter IPO process is no exception at all began on Sept 12, 2013 (Wasserman 2013) , The decision to go public mean In other words that Twitter decides to provide and grant the public with the opportunity to share in the ownership of the company. However, the question is why would the founders of twitter are willing to give away part of their ownership in the company? The answer is that they are not giving it away but they are selling it. Because what the public is paying for the partial ownership in Twitter in fact is going straight into Twitters bank account. For the founders of Twitter, the positive side is that the company becomes richer; therefore, they can use the new cash in the growth and the development the company. The negative side is that the number of the founder stake goes down.

In fact , Twitter took many by surprise when they annouced by a tweet that they has secretly filed a 365 pages document with their preliminary paperwork to go public with the SEC, US institution(Wasserman 2013).Estimating that the IPO would raise around $14Bilion (Twitter, Inc. 2013)The architect of Twitter IPO is a 42 years old finance expert name Mike Gupta, which he guide the company for around four months throughout whole process trying to avoid the problems and missteps that the rival like theFacebook IPO in 2012. (Koh and Demos 2013),Mr. Mike Gupta helped keep confidential for two months of the company's IPO filing; he also kept the company out of the SEC's check, and helped to secure a $1 billion low-interest loan. Therefore, Twitter was able to take advantage of the "confidential IPO. Confidential IPO is an IPO that allow Twitter to avoid being in the spotlight when they do IPO. It is a part of the JOBs Act, which passed on April 5; 2012.According to the Securities and Exchange Commission the Act is for the emerging growth companies. With less than $1 billion in revenue.In fact, there is almost no reason not to do a confidential IPO; it allows a company to not having to deal with the public knowing about how the SEC is treating the S1 filing. Therefore, the confidential IPO allows Twitter to avoid publicly releasing financials until 21 days before its roadshow.The roadshow is when the company's management traveling around to meet with big institutional investors selling them stocks.(JAY YAROW 2013) , In addition, it let Twitter to offer just a glance at its financials, which was just going back to 2010, when they began to earn real money. However, for the two prior years 2008 and 2009, Twitter exercised its right to remain silent (Zachary M. Seward 2013).The Steps of the Twitter IPO process:The actual mechanics of what happen is somehow a little bit complicated, but the basic idea is in fact just a simple economics: the number is set as the price of share, which is balancing between the supply and the demand. As we see the founders, the early employees, and some early investors, where the real owner of twitter share and the company, and the ownership divided into N equal shares and each of the people stake in the company determined by how many of these shares he owns. for example Twitter cofounder Evan Williams owned 57 million of these shares (12 percent of Twitter) and N is around 475 million for Twitter.(John Koetsier 2013)Step 2: When Twitter decided to go for IPO, They needed to choose:First, two numbers: the number of the new shares of Twitter they need to issue, and the price at which to sell these shares. If they decide to issue M number of the new shares of Twitter and sell each one of them for $x , then Twitter adds $xM to its bank account, but on the other hand everyone who owned Twitter shares their ownership in the company reduced by the factor N / (N + M). Therefore, Twitter needed first to choose M, because x must be depends on M, x needs to be the price that public are willing to pay to own 1/(N + M) of TwitterSecond, The stock market: Twitter choose New York Stock Exchange, because the share discovery are manually done and not electronically like in NASDAQ. Which it tends to give more control on the process.

Step 3: Deciding the number of share to offerTwitter decides to offer 70 million shares on the public market, This means that current founder and stakeholder of Twitter have their stakes decreased by a factor of N/(N+M)=475 /(475 + 70) = 13%, that mean 13%of Twitter share is up to grabs. However, how does Twitter come up with this number? Its executives decision about how much money they want to raise, and how much they are willing to give up of their ownership. For example, Based on the number 70 million, Mr. Williams and after the IPO his stake in Twitter will decrease from 12 percent to 10 percent, but this sacrifice is well worth it (because the share value will increase) (Raj Bhuptani 2013).

Step 4: advertise to institutional investorsTwitter advertised their 70 million shares via underwriting banks (in their case Goldman Sachs, and JP Morgan). and they invited investors and Large institutional investors to submit requests for the amount of shares they would like to buy (the investors have no idea on how much they are going to pay per share, but they can do their own calculation and analyses to come up with close estimates).(Raj Bhuptani 2013),So the large institutional investors, like hedge , pension , and mutual funds, gets first priority, followed by houses brokerage and finally individual investors, who get a small amount and percentage of the shares at this point. Nevertheless, why do these investors get first test of the IPO? Average investors often complain that it is not fair, but the reason here is stability: the argument goes that institutional investors (who are accredited, more experienced, and have bigger capacity to take risk) which lead to create stability in the stock price by being the first to receive them (Raj Bhuptani 2013).The banks try to place shares with investors who plan to hold onto the stock. They must submit their requests on how many shares they wish to buy (MARY TURNER 2013). These requests can take many forms. The simple form, (I am willing to buy one million shares, no matter what is the price) , and the complicated (If the offering price of the IPO is between A and B, I am willing to buy X number of shares; if the offering price is going to be between B and C, I am willing to buy Y number of shares. However, the event that Z occurs when the investor not willing to buy any shares). (Raj Bhuptani 2013)Along the roadshow The rumor of the offering price was around $17 and $20 per share, and then increased to be between $23 and $25 or more per share, these prices was based on demand from investors and advice from its investment banks, which would raise the value of Twitter to be between $15 and $16 billion. Moreover, it granted the underwriters the option for 30-days to buy an additional 10.5 million share (Guynn 2013).The company approves the price and issues the shares to its investment banks. Twitter was expected to set the price late Wednesday.The investment banks, or underwriters, and immediately sell the IPO shares to clients, based on the orders it took earlier. (MARY TURNER 2013)

Step 5: Set a share priceOn November 6, 2013, around 4:00pm: Twitter sets its IPO price, the final price is slightly above Twitter'sprevious rangeof $23 to $25 price of a share, so it were expected that Twitter might end up pricing at as high as $28. At this point, Twitter knows that it will raise exactly $26 x 70 million = $1.8 billion in cash from this offering. This offering priced the values of Twitter at $26 x (475 million + 70 million) = $14.2 billion (Fiegerman 2013).Step 6: The day of the IPO, distribute shares among institutional investorsOn November 7, 2013, around 8:30am: The underwriters of Twitter IPO looked at all of the requests that came from the large institutional investors and then they decided how to allocate these shares among them. This is not an easy task to do; they do not give each one of the institutional investor the number of share they requested if their criteria met. First, the total shares that requested by all institutional investors was much more than the offered 70 million (all the institutional investors knows that when the demand for shares exceeds their supply, they need to request a larger number of shares than they really want and set before). Second, at this stage and it is the only chance of the offering company Twitter and the underwriters to have the option to choose and control what are the kind of shareholders they wants to have a stake in the company. They must have a knowledge of the style and the reputations of the institutional investors, and they should consider when they choose to allocate the available shares. We can argue that this process is not fair in the sense that not all of the institutional investors having equal chance in getting shares. The reason of such control from the underwriters because they dont want to grant a larger number of shares to an investor who may flip them (wait until the price raise a little over the opening trade price then immediately dump the position). The underwriters want what best serve their interest they want to have an ideal balance of different types of investors: short term, long term, foreign, and domestic investors. Also we should know that all of the requests at this stage are buy requests, we can find also a rare cases when an institutional investor can request to borrow shares with the intent of creating a short position by selling them directly to other, however this method are not very well received by the underwriters.(Raj Bhuptani 2013)

Step 7: Day of tradingOn November 7, 2013 and Before the stock market opens, a designated market maker (DMM) arrives to the NYSE and he starts to procese orders that was from the night before. The designated market maker is like a instructor for the company's stock. He is an experienced stock trader and his job is to ensure the buy and sell process goes smoothly. If trading of a stock becomes volatile, the DMM can interfear and buy shares using his firm's own money. He is like safety net if somethings goes wrong with the IPO. DMMs, they also called specialists,they are unique to the New York Stock Exchange (NYSE).At 9:15 a.m. Around 15 minutes before the market opens, the traders get their first taste of the public demand in the shares of the Twitter Company. Twitter's DMM worked throughout the initial orders, and got a price quote for the newly issued shares. The price quote usually in a range.(MARY TURNER 2013) Therefore, taking a quick first look at the numbers they are seeing, Twitter's DMM (which is the bank Barclays) reports that the prevailing price seems to be in the range of $40 to $45. This number reported by the news media.At 9:30am. market open : Orders start coming to the stock market from all over the world (Raj Bhuptani 2013) , the traders, who represent dozens of clients and hundreds of investors who may buy or sell, gathered around the DMM and starts placing their own orders. Some investors want to buy IPO, some of them are clients who got IPO shares overnight and they want to sell a portion of their holdings. Each order includes both a price and a size: for example, I am willing to pay $45 per share for 100 shares of Twitter or simply 45 x 100. (Raj Bhuptani 2013)The Twitter's DMM (Barclays) at the NYSE started collecting all of this orders that came in. Now the DMM's job is to find that right price for the newly offered shares of Twitter. Therefore, the DMM, floor traders and underwriters work on setting and finding the opening or starting price. The DMM choose the opening price, so the supply and demand balanced as possible. In other words, the opening price is the price that maximizes the number of trades, which can executed, based on all of the orders submitted thus far. This process called price discovery, the price discovery may take a few minutes around fifteen minutes for the NYSE. but since Twitter is such a high profile stock with a great deal of demand, Also how the underwriters and the Twitter's DMM wanted to handle the company's first trade and the level of demand , the process takes over an hour. Furthermore Price discovery is handled by humans at the NYSE unlike Nasdaq, where they handles the price discovery electronically. The opening price decided for Twitter at $45.10. Once the DMM thinks the company's stock priced correctly (for Twitter, $45.10), they will freeze the book or blocks any new orders from coming in, saying that no more stock orders can be placed. The accepted orders processed into the system, matching the sellers and the buyers based on the sizes and the prices that they submitted.(MARY TURNER 2013) At 10:50 Am.: Twitter stock opens to trading at $45.10 at that point any investor can start selling and buying the shares. Usually the Individual investors often starts to buy the new shares of a company at this point. Step 8: IPO Day closing At (4:00pm) Market closed: Twitter Co. closes at $44.90. The company is valued $44.90 x (475 million + 70 million) = $24.4705B It has raised 70Mx$26 = $1.8B in cash to invest.(Raj Bhuptani 2013).The success of the Twisters IPO process is due to how smoothly the price discovery went, if the price falls below the initial offering price $26 of Twitter, this will looks embarrassing and it will force the underwriters to try to boost up the demand by purchasing shares. Similarly, if the price goes wildly up or down once the trade began, the DMM is the one to blame for not being able of setting the price appropriately. In fact, the closing price $44.90, which is really close to the opening price of $45.10 it is a sign of good performance and stability of the IPO, therefore the DMM and the underwriters performed their job as well as it should be.