Reports claim that the valuation appeared to be much more conservative than the predicted earlier $15 billion, which was believed to attract potential investors who might consider the money-losing company’s listing price a better deal, with room to rise.
The microblogging service had signaled for weeks that it would price its initial public offering modestly in order to avoid the sort of stock plummet that spoiled Facebook’s coming-out party.
Twitter revealed on Thursday its plans to sell 70 million shares between $17 and $20 apiece, raking in up to $1.4 billion for the company. Which is more, if underwriters sell an additional allotment of 10.5 million shares, the offer is expected to reach $1.6 billion.
Now Twitter’s IPO is considered to be the most high-profile Internet one since Facebook’s debut in last May, when the social network’s shares fell below their offering price and did not recover until a year later.
“The fact that the valuation is lower than expectations, I think was smart by the underwriters. I think it will help the pop,” said Michael Yoshikami of Destinational Weath Management.
“But in the end, even for $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,” the specialist added.
The microblogging service and its underwriters launced a two-week road show to attract 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.
“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 its IPO during that period as it draws more and more interest. Twitter is now expected to set its final price on November 6, according to a document reviewed by Reuters, suggesting that the stock could begin trading November 7.
Sam Hamadeh of PrivCo, a private company research firm, told reporters that the company could raise the price range and also the amount of shares being sold. But, he added: “Raising both the price and the size was Facebook’s fatal mistake.”
The company, which was launched eight years ago, has grown to approximately 2,000 employees and opened about 15 offices around the world.
Along the way, Twitter has offered advertisers new ways to reach audiences, from a “promoted tweets” model which was later copied by Facebook and other Internet platforms, to its “second screen” approach to encouraging real-time debate around television programs.
Every month the service is used by 218.3 million active users, on average, in the three months ended June 30.
In a short message from “@twitter,” the company outlined its mission as giving “everyone the power to create and share ideas and information instantly without barriers. Our business and revenue will always follow that mission in ways that improve-and do not detract from-a free and global conversation.”
Co-founder and former CEO Evan Williams is Twitter’s largest shareholder as he owns 12 percent of the shares, while to co-founder and chairman Jack Dorsey belong only 4.9 percent. Biz Williams, another co-founder, has no shares while current Chief Executive Costolo owns 1.6 percent.