The Social media darling disclosed that it planned to sell 70 million shares at $17 to $20 each. At the midpoint of that range, the offering would raise about $1.3 billion and would value Twitter at about $10 billion, excluding options. Including options and restricted stock units, the company would be valued at more than $12 billion.
Such a valuation would make Twitter more than three times as big as one of the first big internet giants, AOL,but only a fraction of Facebook, the last big internet initial public offering, which now has a market value of more than $127 billion.
Company executives ad their advisers will crisscross the country in a series of meetings about the offering, beginning in Baltimore and Washington, before moving on the New York City, Boston Chicago, San Francisco, Los Angeles and Denver. In addition, top management is expected to roll out a video presentation, available to individula investors on the Web.
Twitter has also moved up the pricing of its offering by more than a week, to Nov 6. That means that the socila network would then begin trading on the New Yoerk Stock Exchange, under the ticker symbol TWTR, the next day.
One analyst, Robert Peck of SunTrust Robinson Humphrey, has already predicted that the company would reach $50 a share by the end of next year.
Twitter and its underwriters still have the option of raising the price of the I.P.O before Nov.6. if investor appetite proves ravenous. One of the main concerns that has haunted deal makers is a repeat of Facebook's botched market debut in 2012, when it was troubled by technical problems and critized by some investors as being priced too high at $38 a share.
Analysts say that Twitter deserves a high valuation because it is growing fast. In the third quarter, for instance, its revenue doubled to $168.6 million from the period in 2013. At such rates, Twitter could end up posting more than $1 billion in revenue next year. In that case, an I.P.O. valuation of $11 billion would mean Twitter would start trading at 11 times next year's sales. Facebook, which has far more users but slower growth, is trading at nearly 13 times analysts' estimates of next year's revenue.
At some point, investors will want to do valuations based on Twitter's profits. But since the company currently loses money, under generally accepted accounting principles, such an exercise is imposible.
Facebook trades at about 32 times the $4 billion in Ebitda that analysts expect this year. Applying that multiple to Twitter's adjusted Ebitda,however,yields a valuation of just $1.6 billion.
The Company reported a net loss of $134 million for the first nine months of this year, and spent $199 million on research and development during that periode.
Twitter's ad model, which inserts sponsored messages in the normal 140-character ones that Twitter users generally see, has promise, M.Gellert said. But the company's heavy research spending is going to set high expectations for future performance.
"For the typical investor looking at this, they need to be conscious that it will be starting out at a low financial health level, "Mr.Gellert said." Mobile advertising is still in its infancy, but it's yet to be proved whether in this format, whether it can be valuable," he said.
