Twitter Prepares for IPO Launch

As Twitter prepares to launch its initial public offering, analysts are comparing every move the company makes to Facebook’s problem-plagued May 2012 IPO through Nasdaq. Twitter aims to raise $1.6 billion with its IPO, and analysts have predicted that when the company starts trading it may be worth between $12 billion and $20 billion. As of June 30, 2013, Twitter had 218.3 million active monthly users, reflecting an increase of 44 percent over the same period of last year. The company, which has been operating for seven years, has noted that as the size of its user base increases, user growth rate will slow down.

Currently Twitter’s chairman Jack Dorsey holds 4.9 percent of the company’s stock, with former CEO and co-founder Evan Williams holding 12 percent and current CEO Dick Costolo holding 1.6 percent. Cosolo and Chief Financial Officer Mike Gupta met with large fund managers on Monday and Tuesday of this week to promote Twitter’s IPO, with shares prices at $17 to $20 each and the company valued at around $11 billion. While this is far different from the $100 billion valuation of Facebook prior to its IPO launch, investors are reminded that Facebook had reported revenue of $3.7 billion and an annual profit of $1 billion before it went public, while Twitter reported revenue of $316.9 million and a net loss of $79.4 million in 2012.

Reports indicate that fund managers consider Twitter’s price range to be relatively conservative compared with analyst estimates of $28 to $30. Twitter’s internal valuation of its stock was $20.62 in September. This conservative valuation has enticed investors who are hopeful that Twitter’s shares will climb after the IPO launch through the NYSE on November 7. Facebook’s IPO price of $38 dropped to $25.52 on the first day of trade, before closing at $32.23, and it took the social media giant almost a year to regain its IPO price.

Twitter has chosen to launch its initial purchase offering through the New York Stock Exchange and had a test run on the weekend during which hundreds of thousands of orders were processed. The trial was declared successful. Twitter is expected to set its final IPO price on Wednesday, November 6, with shares trading for the first time on the NYSE on Thursday, November 7.