Twitter plans to raise $1.4bn via its share sale

USA, Oct 25 – Twitter has unveiled the price range for its shares when the company lists on the stock exchange.

In a filing on Thursday, Twitter said it planned to sell 70 million shares priced between $17 and $20 (£10 – £12) to raise up to $1.4bn (£865m).

The offering represents 13% of Twitter and values it at as much as $11bn.

Analysts said the valuation, which was less than forecast, indicated the firm wanted to avoid the dip in prices that followed Facebook's listing.

"They're trying to price this for a very strong IPO, ideally creating the conditions for a solid after-market," said Brian Wieser of the Pivotal Research Group.

Facebook's shares were priced initially at $38 per share. The stock soared within hours of its debut to a high of $45 but later slumped.

Some analysts had blamed over pricing of the shares as a reason behind the fall. However, Facebook shares have since recouped most of their losses and are now trading above the listing price.

Twitter's share sale on the New York Stock Exchange will make it the biggest internet company to go public after Facebook.

In the end, even for $11bn, the question is can they come up with earnings to substantiate that number?” Michael Yoshikami Destinational Wealth Management. The microblogging site has seen steady growth since its launch seven years ago.

According to its IPO documents, it now has 218 million monthly users and 500 million tweets are sent a day.

However, all those users and tweets have not yet resulted in a profit. Twitter made a loss of $69m in the first six months of 2013, on revenues of $254m.

Some analysts said that while the lower-than-expected pricing may help its share prices in the days after the listing, in the long run investors would still need to see the firm make profits.

"The fact that the valuation is lower than expectations, I think was smart by the underwriters. I think it will help the pop," said Michael Yoshikami of Destinational Wealth Management.

"But in the end, even for $11bn, the question is can they come up with earnings to substantiate that number? And it's unclear that they're going to be able to do that."

Advertising

Almost 85% of Twitter's revenue currently comes from advertising on its site.

There are three main ways for a company or an individual to advertise on Twitter: by promoting a tweet that will appear in people's timelines, promoting a whole account, or promoting a trend.

Twitter tends to charge its advertisers according to the amount of interaction their content generates.

Some analysts say the company has showing strong signs of growth, with revenue rising from just $28m in 2010 to $317m by the end of 2012.

One research firm, eMarketer, has even estimated that Twitter's revenues from advertising sales will increase by more than 100% by the end of this year.

 

Source: BBC