News / Economy

Twitter Boosts IPO Range Amid Strong Investor Demand

An updated phone post on the floor of the New York Stock Exchange features a Twitter logo, Nov. 4, 2013, in New York.
An updated phone post on the floor of the New York Stock Exchange features a Twitter logo, Nov. 4, 2013, in New York.
Reuters
Twitter Inc raised the top end of its IPO price range by 25 percent and will close its books a day early, signaling strong demand for the most closely watched Silicon Valley debut since Facebook Inc  last year.
 
Amid a red-hot market for initial public offerings and soaring equity markets, Twitter raised its price range to $23-$25 per share on Monday, but kept the offering size at 70 million shares. That means it will raise up to $2 billion if an overallotment option of 10.5 million shares is exercised.
 
Sources close to the situation said demand among institutional investors was so strong that the final pricing is likely to go even higher than the new range announced on Monday. The sources declined to be identified because the sales process is not public.
 
The microblogging network, which has yet to turn a profit, has amassed 230 million users in seven years, including heads of state, celebrities and activists. About half of all U.S. adult Twitter users said they get news through the social media platform, according to a Pew Research survey.
 
Twitter is the best known Silicon Valley company to go public since Facebook, though it is seeking a far smaller valuation of up to $13.6 billion compared to Facebook's $100 billion.
 
One of the sources said Twitter's IPO is now “massively” oversubscribed and underwriters are looking to select investors who plan to hold the stock for a longer duration rather than traders wanting to do a quick flip.
 
Some funds that ordinarily do not buy IPO shares were seeking allocations of up to 10 percent, but were unlikely to get them, according to the source who requested anonymity.
 
Twitter plans to close the books on the IPO on Tuesday at 12 p.m. EST (1700 GMT), a day earlier than scheduled, because of strong demand, according to two sources with knowledge of the process.
 
The IPO is set to price on Wednesday, with shares to begin trading on the New York Stock Exchange on Thursday. The previous price range was $17-$20 a share.
 
The new pricing would value the company at up to $13.6 billion, or about 12.5-13.6 times forecast 2014 revenue of $1 billion, according to eMarketer. Both Facebook and LinkedIn Corp trade at about 12 times forecast 2014 revenue.
 
Several equity research analysts said they expect Twitter shares to rise after they begin trading, with some setting their one-year price target as high as $52.
 
“We would participate within the $23-$25 range, albeit, simple math would dictate that management should price at the bottom end of the new range,” BTIG's Richard Greenfield said in a note Monday after the price was raised.

Red-hot market
 
Year to date, 2013 has been the strongest for IPOs since 2007 in the United States, with more than 178 companies going public, according to Thomson Reuters data. Equity markets are climbing and investor uncertainty has subsided, at least for now, over the U.S. debt ceiling crisis and political gridlock.
 
Shares of Container Store Group Inc doubled on their first day of trade on Nov. 1, joining strong debuts from more than half a dozen companies, including restaurant chains Noodles & Co and Potbelly Corp and software company Benefitfocus Inc.
 
Twitter management has been traveling the United States over the past week, speaking with potential investors.
 
Some investors and analysts have raised concerns about Twitter being overly reliant on advertising sales, with few other significant revenue sources in the near term. Twitter said last month that its third-quarter revenue more than doubled to $168.6 million, but net losses widened to $64.6 million from $21.6 million a year earlier.
 
Twitter also disclosed in its new IPO filing on Monday that it had received a letter from International Business Machines Corp accusing the social media company of infringing on at least three U.S. patents.
 
Although many tech companies wrangle over intellectual property claims, IBM is a more serious and deep-pocketed threat than any accuser Twitter has faced before. Twitter's thin patent portfolio has been long been a vulnerability, and the company will likely have to spend money to acquire patents, experts say.
 
“Twitter has very little IP of their own,” said Maulin Shah of Envision IP, an advisory firm. “They seem to have been more focused on talent and product acquisitions, but I would not be surprised if they now go out and try to actively acquire companies that have larger IP portfolios.”
 
Twitter said it had legitimate defense against IBM's accusations but warned that “there can be no assurance that we will be successful in defending against these allegations or reaching a business resolution that is satisfactory to us.”

Facebook's experience
 
Adam Grossman, an analyst at Boston investment firm Middleton & Co, with about $500 million under management, said his firm has yet to decide whether to buy into the IPO. The higher valuation “does make me more skeptical” he said.
 
But Grossman noted that Twitter's bankers were conservative in not raising the size of the offering, which had caused problems for Facebook's IPO.
 
Facebook raised its price range as well as the total number of shares in its IPO just before it debuted in May 2012. The move maximized the amount that Facebook's backers raised but contributed to declines in the stock in the early days of trade.
 
Twitter in contrast has won plaudits for running a more modest IPO pitch process, including roadshow presentations that focused on business fundamentals.
 
Goldman Sachs is leading Twitter's IPO, alongside Morgan Stanley and JPMorgan Chase & Co.

You May Like

Video Experts Warn World Losing Ebola Fight

Doctors Without Borders says world is losing battle against Ebola, unless wealthy nations dispatch specialized biological disaster response teams More

Video Experts: Rise of Islamic State Significant Development in Jihadism

Many analysts contend the group - which grew out of al-Qaida in Iraq - has been rebuilding for years More

US-Based Hong Kongers Pledge Support for Pro-Democracy Activists

Democracy advocates call on Chinese living abroad to join them in opposing new election rules for their home territory More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Larger Than Life Chinese Lanterns Make Southern California Appearancei
X
Elizabeth Lee
September 02, 2014 8:57 PM
Chinese lanterns with a long history are lighting up in 21st century style at the Los Angeles County Fair in southern California. Visitors can see traditional lanterns that hang, but also lanterns in the shape of animals, iconic landmarks and many other objects, all created by artisans from a place in China known for its lanterns. Elizabeth Lee has the details from the fair in the city of Pomona.
Video

Video Larger Than Life Chinese Lanterns Make Southern California Appearance

Chinese lanterns with a long history are lighting up in 21st century style at the Los Angeles County Fair in southern California. Visitors can see traditional lanterns that hang, but also lanterns in the shape of animals, iconic landmarks and many other objects, all created by artisans from a place in China known for its lanterns. Elizabeth Lee has the details from the fair in the city of Pomona.
Video

Video Experts See Rise of ISIS as Significant Development

The Islamic State’s rise seems sudden. It caught the U.S. by surprise this summer when it captured large portions of northern Iraq and spread its wings in neighboring Syria. But many analysts contend that the group - which grew out of al-Qaida in Iraq - has been rebuilding for years. VOA's Jela de Franceschi takes a closer look at the rise of ISIS and its implications for the Middle East and beyond.
Video

Video Israel Concerned Over Syrian Rebels in Golan

Israeli officials are following with concern the recent fighting between Syrian rebels and government forces near the contested Golan Heights. Forty-four U.N. peacekeepers from Fiji have been seized by Syrian Islamist rebels and the clashes occasionally have spilled into Israel. VOA’s Scott Bobb reports from Jerusalem.
Video

Video Ukraine Schools Resume Classes, Donate to Government Forces

A new school year has started in Ukraine but thousands of children in the war-torn east are unable to attend because of ongoing clashes with pro-Russia rebels. In Ukraine's capital, patriotic education has become the norm along with donations to support injured security forces fighting to take back rebel-held areas. VOA's Daniel Schearf reports from Kyiv.
Video

Video US Detainees Want Negotiators for Freedom in North Korea

The three U.S. detainees held in North Korea were permitted to speak with foreign media Monday. The government of Kim Jong Un restricted the topics of the questions, and the interviews in Pyongyang were limited to five minutes. Each of the men asked Washington to send a representative to Pyongyang to secure his release. VOA’s Carolyn Presutti has our story.
Video

Video Turkmen From Amerli Describe Survival of IS Siege

Over the past few weeks, hundreds of Shi'ite Turkmen have fled the town of Amerli seeking refuge in the northern city of Kirkuk. Despite recent military gains after U.S. airstrikes that were coordinated with Iraqi and Kurdish forces, the situation remains dire for Amerli’s residents. Sebastian Meyer went to Kirkuk for VOA to speak to those who managed to escape.
Video

Video West Africa Ebola Vaccine Trials Possible by Early 2015

A U.S. health agency is speeding up clinical trials of a possible vaccine against the deadly Ebola virus that so far has killed more than 1,500 people in West Africa. If successful, the next step would be a larger trial in countries where the outbreak is occurring. VOA's Carol Pearson has more.
Video

Video Survivors Commemorate 70th Anniversary of Nazi Liquidation of Jewish Ghetto

When the German Nazi army occupied the Polish city of Lodz in 1939, it marked the beginning of a long nightmare for the Jewish community that once made up one third of the population. Roughly 200,000 people were forced into the Lodz Ghetto. Less than 7,000 survived. As VOA’s Kane Farabaugh reports, some survivors gathered at the Union League Club in Chicago on the 70th anniversary of the liquidation of the Lodz Ghetto to remember those who suffered at the hands of the Nazi regime.

AppleAndroid

World Currencies

EUR
USD
0.7537
JPY
USD
103.79
GBP
USD
0.6032
CAD
USD
1.0957
INR
USD
60.522

Rates may not be current.