Twitter IPO pegs valuation at modest $11 billion

Fri Oct 25, 2013 1:47pm EDT
 
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By Alexei Oreskovic and Gerry Shih

SAN FRANCISCO (Reuters) - 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 signaled 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.

"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."

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.   Continued...

 
Dick Costolo (L), chief executive of Twitter, departs Morgan Stanley in advance of the firm's IPO in New York, October 25, 2013. REUTERS/Carlo Allegri