Tweet music to investors' ears: Twitter shares priced at $26 each
Banks including Goldman Sachs and Morgan Stanley are targeting sale of 70m shares
Paul Gallagher is a reporter for the Independent and Independent on Sunday having joined the group in 2012. He has previously worked for the European Voice, Daily Mirror and the Observer and been based in Brussels, Belfast, Tokyo and London.
Wednesday 06 November 2013
Twitter shares have been priced at $26 each ahead of its float on the New York Stock Exchange in the biggest technology IPO since Facebook.
That is above the $23 and $25 range announced earlier this week and sees the company valued at more than $18bn.
The flotation is being underwritten by a number of investment banks including Goldman Sachs and Morgan Stanley who are targeting the sale of 70 million shares. However, almost all Twitter users will be excluded until shares start publicly trading as banks pick who buys the stock - and they tend to give it to their favoured customers who buy in big mutual funds.
Although revenues are rising - $316.9m last year, up from $106 million in 2011 - Twitter still witnessed a net loss of $79 million in 2012.
It clearly took a lot more than 140 characters to predict what would finally happen to the micro-blogging service once it finally went public but that did not stop people trying in the run-up to the flotation.
Twitter's media profile has led some to say it will follow a Google shaped path while sceptical others pointed to the fact that with 240m users it commands just a fifth of the numbers Facebook boasts therefore predicting an overblown flotation along Groupon lines with its shares losing half their original value since that 2011 offering.
Although Facebook, which made its public debut amid intense hype last year, lost nearly half its value in the first four months, shares in Mark Zuckerberg's company are now about 30 per cent higher than when it first launched.
With Twitter's share price soaring by 25 per cent prior to Wednesday, Evan Williams is one man who is guaranteed to smile whatever the reaction. Twitter's founding investor is set to transform into a billionaire once trading ends on day one having taken a punt in the social network's early days: his sizeable share could be worth up to $1.2bn.
An even bigger winner will be private equity boss Suhail Rizv. The Indian-born American entrepreneur's 15 per cent share is worth at least $1.9bn.
Saudi royalty and Russian oligarchs are mixed in with media moguls and technology entrepreneurs among the list of early investors that featured in the company's IPO prospectus. Former senior News Corp executives Peter Chernin and Adam Bain are also sitting on hundreds of millions of dollars while Twitter co-founder and director Jack Dorsey, who said he dreamt up the micro-blogging idea while at New York University, has five per cent of shares worth around $500m.
Professor Aswath Damodaran, from the Stern School of Business in New York, told Voice of America on Wednesday that the predictive share value is based on what bankers think investors are willing to pay.
He said: "They're pricing Twitter based on what Facebook is trading for, and Linked-in is trading for. They're not valuing the company. I'd say wait for Twitter to settle down. The first year or two after a company goes public, it's really going to go through waves of momentum that are very difficult to forecast. So you have to make a decision whether you're a trader or an investor."
Twitter CEO Dick Costolo stuck to the character limit with his pre-recorded prediction ahead of a roadshow this week to promote the flotation. "We've only just scratched the surface of everything that Twitter can become," he said.
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