The Mysterious and Volatile World of IPOs

You could say that Twitter  (NYSE: TWTR  ) had a good first day on the market, gaining nearly 75% from its IPO offering price. While the offer priced at $26 the previous night, shares opened the next day above $45. Individual investors hoping to get in at that offer price would have had to go through much more legwork to participate in the primary market, which is when investors buy shares directly from the company.

After that, shares will begin trading in the secondary market, and the price will be determined entirely by supply and demand. In this case, the market decided it was willing to pay nearly $20 more than IPO price. 

In this segment of Tech Teardown, Erin Kennedy discusses the mechanics of Twitter's public debut with Evan Niu, CFA, our tech and telecom bureau chief. 

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