Seeking to avoid a repeat of Facebook Inc.’s much-maligned public debut, Twitter Inc revealed more modest ambitions, saying its initial offering would raise up to $1.6 billion and value the company at up to about $11 billion.
The valuation was more conservative than the $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 signalled 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 $17 and $20 apiece, raking in up to $1.4 billion for the company.
If underwriters choose to sell an additional allotment of 10.5 million shares, the offer could raise as much as $1.6 billion.
Twitter’s offering will be the most high-profile internet IPO since Facebook’s May 2012 debut, 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.
At a roughly $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 $342 billion and $483 billion respectively. Facebook’s market value is now $128 billion.
Twitter and its underwriters begin a two-week road show to woo investors on 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. “They’re trying to price this for a very strong IPO, ideally creating the conditions for a solid after-market,” said Pivotal Research Group’s Brian Wieser, who valued the company at $19 billion.
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 November 6, according to a document reviewed by Reuters, suggesting that the stock could begin trading as early as November 7.
Twitter’s debut will cap seven years of explosive growth for an online messaging service that counts heads of state and major celebrities among its 230 million active users – but still operates at a loss.
Twitter will sell roughly 13 per cent 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 company plans to list its stock under the TWTR symbol on the New York Stock Exchange.
Among the biggest Twitter shareholders selling in the offering is Rizvi Traverse, a fund managed by Connecticut-based investor Suhail Rizvi, who has quietly amassed a 17.9 per cent stake in Twitter with the help of Silicon Valley investor Chris Sacca.
Rizvi’s stake will fall to 15.6 per cent of total shares outstanding after the sale. JP Morgan Chase, which obtained Twitter shares through Rizvi and Sacca, will see its stake fall to nine per cent from 10.3 per cent.
Twitter co-founder Evan Williams, the largest individual shareholder, will reduce his stake to 10.4 per cent from 12 per cent, while chief executive Dick Costolo will emerge with a 1.4 per cent stake, compared with 1.6 per cent currently.
Co-founder Jack Dorsey will also sell shares, as will early venture capital investors Spark Capital, Union Square Ventures and Benchmark Capital.
Because many early shareholders, including Williams, previously sold parts of their stake to other investors like Rizvi, Twitter’s relatively fractured ownership structure looks markedly different from the likes of Facebook and other tech companies dominated by their founders.
When Facebook went public last year, founder and chief executive Mark Zuckerberg kept 57 per cent of the company’s voting shares, thanks to a scheme that gave him twice the voting power of ordinary shareholders. (Reuters)