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Twitter plans to raise up to $1.4bn in IPO Twitter plans to raise $1.4bn via its share sales
(about 9 hours later)
Twitter is to sell 70 million shares priced between $17 and $20 (£10 - £12) when the company makes its debut on the New York Stock Exchange. Twitter has unveiled the price range for its shares at it prepares for its initial public offering (IPO).
This offering represents 13% of the microblogging site. In a filing on Thursday, Twitter said it planned to sell 70 million shares priced between $17 and $20 (£10 - £12) to raise up to $1.4bn (£865m).
It values Twitter at as much as $11.1 billion (£6.8bn), making it the biggest internet company to go public since Facebook. The offering represents 13% of Twitter and values it at as much as $11bn.
However, despite big user figures, the company has yet to turn a profit. Analysts said the valuation, which was less than forecast, indicated the firm wanted to avoid the dip in prices that followed Facebook's listing.
Twitter currently has 200 million active users, who send more than 500 million tweets a day. "They're trying to price this for a very strong IPO, ideally creating the conditions for a solid after-market," said Brian Wieser of the Pivotal Research Group.
The company is expected to post $583m in revenue in 2013, according to advertising consultancy eMarketer, up from $288m in 2012. Facebook's shares were priced initially at $38 per share. The stock soared within hours of its debut to a high of $45 but later slumped.
The majority of Twitter's revenue comes from advertising, with companies paying for "promoted tweets". Some analysts had blamed over pricing of the shares as a reason behind the fall. However, Facebook shares have since recouped most of their losses and are now trading above the listing price.
Many analysts expect that it will make its market debut in mid-November after it has completed a so-called "shopping period" where it makes its pitch to potential investors. Earnings worries
The company has said that its stock symbol will be "TWTR". Twitter IPO on the New York Stock Exchange will make it the biggest internet company to go public after Facebook.
The microblogging site has seen steady growth since its launch seven years ago.
According to its IPO documents, it now has 218 million monthly users and 500 million tweets are sent a day.
However, all those users and tweets have not yet resulted in a profit. Twitter made a loss of $69m in the first six months of 2013, on revenues of $254m.
Some analysts said that while the lower-than-expected pricing may help its share prices in the days after the listing, in the long run investors would still need to see the firm make profits.
"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 Wealth Management.
"But in the end, even for $11bn, 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."
Almost 85% of Twitter's revenue currently comes from advertising on its site.
There are three main ways for a company or an individual to advertise on Twitter: by promoting a tweet that will appear in people's timelines, promoting a whole account, or promoting a trend.
Twitter tends to charge its advertisers according to the amount of interaction their content generates.
Some analysts say the company has showing strong signs of growth, with revenue rising from just $28m in 2010 to $317m by the end of 2012.
One research firm, eMarketer, has even estimated that Twitter's revenues from advertising sales will increase by more than 100% by the end of this year.