Twitter Inc. is seeking as much as $1.4 billion in the largest Internet initial public offering since Facebook Inc., betting that it can convince investors of its ability to turn 500 million tweets a day into profits.
Twitter plans to sell 70 million shares at $17 to $20 each in the offering, according to a regulatory filing Thursday. That would value Twitter at $10.9 billion at the top end of the range, based on the 544.7 million common shares that will be outstanding after the IPO.
“They're picking a slightly lower valuation to ensure that the IPO goes up on the first day of trading,” said Francis Gaskins, president of IPODesktop.com. “I would definitely buy them in the offering at this valuation.”
The six-year-old short-messaging site, which draws more than 230 million monthly active users and has transformed the way people communicate, is taking advantage of renewed appetite for social-media stocks to sell a 13% stake. While the company has more than doubled revenue every year, it hasn't yet turned a profit and the pace of user gains is slowing. Still, chief executive Dick Costolo is betting the service's popularity on mobile phones will help lure advertisers.
SILICON VALLEY'S TAKE
Twitter is aiming to avoid the fate of Facebook, whose stock fell below its $38 debut price after its record $16 billion Internet IPO in May 2012 before finally rallying to close above that level in August.
For Silicon Valley, a successful Twitter IPO will go a long way toward erasing the aftertaste from Facebook's IPO, which along with the poor stock market performances of Web companies like Zynga Inc. and Groupon Inc., dented confidence in consumer Internet companies.
Following those offerings, venture capitalists and others shifted investing dollars to technology businesses that sold their products to other businesses, said Nihal Mehta, founder of LocalResponse Inc. and a venture capitalist at Eniac Ventures. Now with Twitter's debut and Facebook trading above its offering price, confidence in consumer technology has revived.
“Twitter will help escalate all the other advertising-based consumer companies, and create potential for more to be born,” Mr. Mehta said. “We're seeing more consumer deals than we ever have before.”
BOOSTING SOCIAL MEDIA
Twitter's average revenue per user is less than half Facebook's, regulatory filings show. The service had an monthly average of 231.7 million active users in the three-month period through September, up 39% from the year-earlier period. That compares with 65% growth the prior year.
With the money from the offering, Twitter may seek to expand globally and prove it can draw advertisers to the network. Advertisers can sponsor one of the service's 140-character posts, paying to have it show up on users' feeds even if they don't follow the company.
About three-fourths of Twitter's most active users accessed the service from mobile devices in the third quarter, compared with 69% in the year-earlier period, filings show. More than 70% of advertising revenue comes from those devices, a higher proportion than Facebook's.
The Goldman Sachs Group Inc. is the lead underwriter of the IPO, joined by Morgan Stanley, JPMorgan Chase & Co., Bank of America Corp., Deutsche Bank AG, Allen & Co. and Code Advisors. Twitter has said it will list on the New York Stock Exchange and trade under the symbol TWTR.
Co-founder Evan Williams' stake will drop to 10.4% from 12% after the offering, the filing shows. He's the single biggest individual stockholder.