Sat, Oct 26, 2013 - Page 15 News List

Twitter modest in its IPO estimations

NOVEMBER OFFERING:Company officials and their underwriters are scheduled to begin a two-week road show on Monday in New York and set a final price on Nov. 6

Reuters, SAN FRANCISCO

Seeking to avoid a repeat of Facebook Inc’s much-maligned public debut, Twitter Inc revealed more modest ambitions, saying its initial public offering (IPO) would raise up to US$1.6 billion and value the company at up to about US$11 billion.

The valuation was more conservative than the US$15 billion some analysts had expected for the social media phenomenon, potentially attracting investors who might consider the money-losing company’s listing price a better deal, with room to rise.

Twitter had signaled for weeks it would price its IPO modestly to avoid the sort of stock plummet that spoiled Facebook’s coming-out party. It said on Thursday it intends to sell 70 million shares between US$17 and US$20 apiece, raking in up to US$1.4 billion.

If underwriters choose to sell an additional allotment of 10.5 million shares, the offer could raise as much as US$1.6 billion.

Twitter’s offering will be the most high-profile Internet IPO since Facebook’s debut in May last year, when the social network giant’s shares fell below their offering price and did not recover until a year later. Still, the modest pricing doesn’t obscure questions about Twitter’s profitability.

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

“But in the end, even for US$11 billion, 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,” he said.

At a roughly US$11 billion valuation, Twitter would be worth more than Yelp Inc and AOL Inc combined, but only a fraction of tech giants like Google Inc and Apple Inc, worth US$342 billion and US$483 billion respectively. Facebook’s market value is now US$128 billion.

Twitter and its underwriters begin a two-week road show to woo investors next Monday in New York, with stops in Boston and the mid-Atlantic region before touching down in Chicago, San Francisco, Los Angeles and Denver, according to a source familiar with the offering.

The company could choose to raise the price of the offering during that period as it gauges interest. Twitter is expected to set a final price on Nov. 6, according to a document reviewed by reporters, suggesting that the stock could begin trading as early as Nov. 7.

Twitter will sell roughly 13 percent of the company in the IPO and will have 544,696,816 shares outstanding after the offering. That figure could rise given the exercising of options, restricted stock units and the issuance of shares for compensation after the IPO.

The firm plans to list its stock under the “TWTR” symbol on the New York Stock Exchange.

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