News / Economy

Twitter's 'Anti-Facebook' IPO Tactics Win Over Some Investors

FILE - Twitter CEO Dick Costolo gestures during a conference at the Cannes Lions in Cannes, France, June 20, 2012. FILE - Twitter CEO Dick Costolo gestures during a conference at the Cannes Lions in Cannes, France, June 20, 2012.
x
FILE - Twitter CEO Dick Costolo gestures during a conference at the Cannes Lions in Cannes, France, June 20, 2012.
FILE - Twitter CEO Dick Costolo gestures during a conference at the Cannes Lions in Cannes, France, June 20, 2012.
Reuters
Institutional investors who met with Twitter Inc this week say they are optimistic about its initial public offering and see little sign of the irrational exuberance that preceded Facebook Inc's splashy coming-out party in 2012.
 
On Monday and Tuesday, Twitter Chief Executive Dick Costolo and Chief Financial Officer Mike Gupta met with large fund managers and analysts in New York and on the East Coast to sell them on an IPO that seeks to raise up to $1.6 billion for the loss-making social media company.
 
Closely watched by Wall Street and Silicon Valley, Twitter's relatively conservative offering has differed from Facebook's $16 billion IPO in a panoply of ways, from its vastly smaller deal size to a decision to list on the New York Stock Exchange over Nasdaq.
 
“It definitely was different than when (Facebook CEO Mark) Zuckerberg came through ... It's the right kind of buzz,” said one fund manager who met with Twitter on Monday.
 
“With Facebook, the buzz was just stupid,” said the manager, who declined to be identified because he was not authorized to speak to the media.
 
Twitter last week said that it would price its IPO shares at $17 to $20 a piece, valuing the online messaging company at up to about $11 billion. That is less than the $15 billion that analysts had expected, and far below the $100 billion valuation that Facebook received in its IPO last May.
 
However, Facebook had reported an annual profit of $1 billion and revenue of $3.7 billion before it went public, whereas Twitter reported a net loss of $79.4 million on revenue of just $316.9 million in 2012.
 
At the upper end of its IPO price range, Twitter would be valuing itself at 20 times trailing 12-month sales currently, and about 17  times at the lower end, according to Reuters' calculations from Twitter's IPO filings. But its outstanding share base could swell by tens of millions of stock as holders exercise options and restricted stock units, inflating the valuation.
 
In comparison, Facebook trades at about 24 times trailing 12-month sales and LinkedIn Corp at roughly 30 times.
 
And yet....
 
Fund managers viewed Twitter's price range as relatively conservative, basing their perspective on earlier guesses that had pegged the company's range as $28 to $30. Twitter itself mentioned that it had internally valued its own stock at $20.62 as recently as in September.
 
That has attracted some investors who expect Twitter's shares to climb after they begin trading on the New York Stock Exchange on Nov. 7.
 
Twitter “is getting a really warm welcome from people,” said Scott Sweet, CEO of research firm IPO Boutique.
 
“Of all the individuals and institutions I've talked to - which include multi-billion dollar hedge funds - no one has said they aren't playing,” Sweet said.
 
Facebook's float was marred by an 11 percent drop in the stock on its second day of trade and successive declines over the next few months as investors questioned the company's ability to grow revenue through mobile devices.
 
It didn't help that, before its debut, Facebook's underwriters raised the size of the IPO by 25 percent and also hiked the price range. Finally, technical problems with Nasdaq trading systems delayed the start of trade, sowing confusion amongst nervous traders.
 
It took over a year for Facebook shares to reclaim their IPO price.
 
Another investor, who owns shares in Facebook and LinkedIn said his firm is approaching all the Twitter underwriters to ask for a 10 percent allocation, with the hopes of getting between 1.5 to 3 percent.
 
“It's a stupid game that is played ... if you can get what you want, then you don't want it,” he said.
 
Some investors say they believe management has learned from Facebook's mistakes and are pricing the deal in a more conservative manner.
 
“It's the anti-Facebook” said a second fund manager, who also spoke on condition of anonymity and is planning on meeting with management later this week.
 
Twitter will hold its first large investor lunch in New York on Wednesday, and investor interest is expected to build as the roadshow proceeds. After stops in Boston, Chicago, San Francisco, Los Angeles and Denver, the roadshow ends in New York next week with pricing scheduled for Nov. 6 and trading on the New York Stock Exchange to commence a day later under the ticker symbol “TWTR.”
 
The company founders “are gazillionaires already. I think they're not going to want to spend the year after the IPO dominated by the argument about 'why we the IPO,”' the second fund manager said. “Life is short.”

You May Like

UN: 1 Million Somalis at Risk of Hunger

Group warns region is in dire need of humanitarian aid, with at least 200,000 children under age of five acutely malnourished as drought hits southern, central part of nation More

Human Rights Groups Allege Supression of Freedoms in Thailand

Thailand’s military, police have suppressed release of independent report assessing human rights in kingdom during first 100 days of latest coup More

Jennifer Lawrence Contacts FBI After Nude Photos Hacked

'Silver Linings Playbook' actress' photos were posted on image-sharing forum 4chan; Federal Bureau of Investigations is looking into matter 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.
Ukraine Schools Resume Classes, Donate to Government Forcesi
X
September 02, 2014 12:58 PM
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 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 Internet, Technology Offer New Tools for Journalists

The Internet and rapidly evolving technology is quickly changing how people receive news and how journalists deliver it. There are now more ways to tell a story than ever before. One school in Los Angeles is teaching the next generation of journalists with the help of a state-of-the-art newsroom. Elizabeth Lee has this report.
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.
Video

Video Cost to Raise Child in US Continues to Rise

The cost of raising a child in the United States continues to rise. In its latest annual report, the U.S. Department of Agriculture says middle income families with a child born in 2013 can expect to spend more than $240,000 before that child turns 18. And sending that child to college more than doubles that amount. VOA’s Deborah Block visited with a couple with one child in Alexandria, Virginia, to learn if the report reflects their lifestyle.
Video

Video Chaotic Afghan Vote Recount Threatens Nation’s Future

Afghanistan’s troubled presidential election continues to be rocked by turmoil as an audit of the ballots drags on. The U.N. says the recount will not be completed before September 10. Observers say repeated disputes and delays are threatening the orderly transfer of power and could have dangerous consequences. VOA correspondent Meredith Buel reports.

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.