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 Ambassador Power Highlights Plight of Women Prisoners

She launches the 'Free the 20' campaign, aimed at profiling women being deprived of their freedom around the world More

Satellite Launch Sparks Spectacular Light Show

A slight delay in a satellite launch lit up the Florida sky early this morning More

Fleeing IS Killings in Syria, Family Reaches Bavaria

Exhausted, scared and under-nourished, Khalil and Maha's tale mirrors those of thousands of refugees from war-torn countries who have left their homes in the hopes of finding a better life 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.
Nobel Prize Winner Malala Talks to VOAi
X
August 31, 2015 2:17 AM
Nobel Peace Prize winner Malala Yousafzai met with VOA's Deewa service in Washington Sunday to talk about women’s rights and unveil a trailer for her new documentary. VOA's Katherine Gypson has more.
Video

Video Nobel Prize Winner Malala Talks to VOA

Nobel Peace Prize winner Malala Yousafzai met with VOA's Deewa service in Washington Sunday to talk about women’s rights and unveil a trailer for her new documentary. VOA's Katherine Gypson has more.
Video

Video War, Drought Threaten Iraq's Marshlands

Iraq's southern wetlands are in crisis. These areas are the spawning ground for Gulf fisheries, a resting place for migrating wildfowl, and source of livelihood for fishermen and herders. Faith Lapidus has more.
Video

Video Colombians Flee Venezuela as Border Crisis Escalates

Hundreds of Colombians have fled Venezuela since last week, amid an escalating border crisis between the two countries. Last week, Venezuelan President Nicolas Maduro ordered the closure of a key border crossing after smugglers injured three Venezuelan soldiers and a civilian. The president also ordered the deportation of Colombians who are in Venezuela illegally. Zlatica Hoke reports.
Video

Video Rebuilding New Orleans' Music Scene

Ten years after Hurricane Katrina inundated New Orleans, threatening to wash away its vibrant musical heritage along with its neighborhoods, the beat goes on. As Bronwyn Benito and Faith Lapidus report, a Musicians' Village is preserving the city's unique sound.
Video

Video In Russia, Auto Industry in Tailspin

Industry insiders say country relies too heavily on imports as inflation cuts too many consumers out of the market. Daniel Schearf has more from Moscow.
Video

Video Scientist Calls Use of Fetal Tissue in Medical Research Essential

An anti-abortion group responsible for secret recordings of workers at a women's health care organization claims the workers shown are offering baby parts for sale, a charge the organization strongly denies. While the selling of fetal tissue is against the law in the United States, abortion and the use of donated fetal tissue for medical research are both legal. VOA’s Julie Taboh reports.
Video

Video Next to Iran, Climate at Forefront of Obama Agenda

President Barack Obama this week announced new initiatives aimed at making it easier for Americans to access renewable energy sources such as solar and wind. Obama is not slowing down when it comes to pushing through climate change measures, an issue he says is the greatest threat to the country’s national security. VOA correspondent Aru Pande has more from the White House.
Video

Video Arctic Draws International Competition for Oil

A new geopolitical “Great Game” is underway in earth’s northernmost region, the Arctic, where Russia has claimed a large area for resource development and President Barack Obama recently approved Shell Oil Company’s test-drilling project in an area under U.S. control. Greg Flakus reports.
Video

Video Philippine Maritime Police: Chinese Fishermen a Threat to Country’s Security

China and the Philippines both claim maritime rights in the South China Sea.  That includes the right to fish in those waters. Jason Strother reports on how the Philippines is catching Chinese nationals it says are illegal poachers. He has the story from Palawan province.
Video

Video China's Spratly Island Building Said to Light Up the Night 'Like A City'

Southeast Asian countries claim China has illegally seized territory in the Spratly islands. It is especially a concern for a Philippine mayor who says Beijing is occupying parts of his municipality. Jason Strother reports from the capital of Palawan province, Puerto Princesa.
Video

Video Ages-old Ice Reveals Secrets of Climate Change

Ice caps don't just exist at the world's poles. There are also tropical ice caps, and the largest sits atop the Peruvian Andes - but it is melting, quickly, and may be gone within the next 20 years. George Putic reports scientists are now rushing to take samples to get at the valuable information about climate change locked in the ice.

VOA Blogs

World Currencies

EUR
USD
0.8916
JPY
USD
121.32
GBP
USD
0.6487
CAD
USD
1.3252
INR
USD
66.401

Rates may not be current.