Twitter raises IPO price range to $23 to $25
07 Nov 2013
Bullish about its imminent initial public offering, social networking site Twitter has raised the price range for its IPO to $23 to $25, as it prepares to debut on the market week.
The new range pushes up Twitter's potential market value by several billion dollars, with its valuation at the higher end going up to $13.9 billion at the start of its first day of trading.
This is higher than the other relatively young technology companies like Groupon and Zynga, but lower than Facebook, valued at about $119 billion, and LinkedIn, valued at about $25 billion.
The new range also increases the amount of money that the company would raise for itself. At the midpoint, the offering would raise about $1.7 billion for the company, in a substantial capital infusion to finance its growth.
In a filing with the Securities and Exchange Commission on 24 October, the company said it planned to sell 70 million shares at $17 to $20 each. That range undershot analysts expectations in a sign of the company's cautious approach as it sought not to inflate expectations.
According to commentators, the higher range suggested that Twitter was emboldened by the positive response to its road show.
Meanwhile, some commentators have raised the prospect of a replay of the 1999 bubble era of IPOs as investors look to ride the social network's coattails to riches.
Fox Business quoted James Gellert, CEO of analytical and independent ratings from Rapid Ratings as saying Twitter looked like a bubble-era IPO. He added the company obviously had a really intriguing business but that did not mean it could be monetised.
According to Gellert, analysis by his firm of Twitter's financials revealed that the micro-blogging company's risk profile was eerily similar – 92 per cent to be exact -- to the financial metrics of bubble-era IPOs.
As against this, professional networking sit LinkedIn matched just 46 per cent of these unfavorable metrics at the time of its very successful IPO and more-mature Facebook (FB) mirrored only 33 per cent when it went public last year.
Gellert said retail investors needed to be very conscientious about following up on the developments of the company, adding this was not one you just tucked away and assumed it was going to do great.
However, the high risk profile did not necessarily mean that Twitter's IPO would be a dud or that its future was bleak.
Rick Summer, senior stock analyst at Morningstar wrote in a bullish research note published Friday,''Twitter has only just begun to turn on its monetization engine for more than 230 million monthly active users.''
