Twitter plans to raise up to $1.4bn via its share sale

Twitter logo Twitter says it has over 200 million active users but has yet to turn a profit

Related Stories

Twitter has unveiled the price range for its shares when the company lists on the stock exchange.

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).

The offering represents 13% of Twitter and values it at as much as $11bn.

Analysts said the valuation, which was less than forecast, indicated the firm wanted to avoid the dip in prices that followed Facebook's listing.

"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.

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.

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.

A price tag of $11 billion might look a bit steep for a company that is still not profitable - but Twitter's valuation looks conservative compared to some of those it is following onto the market.

There had been reports that the company would be seeking a valuation of as much as $16 billion, but at $11 billion that's a multiple of roughly ten times its projected 2014 revenues.

Facebook went public at a value of $100 billion - twenty times its 2012 revenue - while LinkedIn launched at an even higher multiple.

Perhaps Twitter is right to be cautious - after all, its business model is still fairly opaque, even though there are promising signs that it is working out clever ways of serving advertisers.

In any case the founder Ev Williams, who will now be a billionaire, can be pretty satisfied. A new book, Hatching Twitter, reveals that he turned down an offer from Yahoo to buy the company when it was still a fledgling. The price tag back in 2007? Just $12 million.

Earnings worries

Twitter's share sale 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."

Start Quote

Twitter happens in real time, 24 hours a day. Expect to miss stuff if it's not sent direct to you”

End Quote
Advertising

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.

More on This Story

Related Stories

More Business stories

RSS

BBC Business Live

  1.  
    BARCLAYS PROFITS 07:03: Breaking News

    Barclays profit before tax is down 10% at £3.84bn.

     
  2.  
    BRITISH GAS BOSS 07:03:
    Iain Conn

    In all the excitement over bankers' bonuses we nearly forgot this. British Gas owner Centrica has succeeded in its pursuit of Iain Conn, confirming he will become its new chief executive from January 2015, succeeding Sam Laidlaw who is retiring. Mr Conn joins from BP where he has been chief executive, of BP's refining and marketing division,for the past seven years.

     
  3.  
    BARCLAYS PROFITS 06:52: BBC Radio 4
    Pedestrians pass a branch of Barclays Bank in the rain in London

    Michael Hewson, chief market analyst at CMC Markets is talking to the Today programme about Barclays interim results - coming up imminently. He says the investment banking arm of Barclays is "not listening" to new boss Antony Jenkins who has been trying to clean up the bank's reputation and practices.

     
  4.  
    DRIVERLESS CARS 06:44:
    Nissan car

    It's going to be a bank-heavy day today let's face it, but just to provide a break from all that, the government will be announcing changes in the law that will pave the way for driverless cars to take to Britain's roads next year. The government wants the UK to become a leader in developing the technology. In December, the Treasury said it would create a £10m prize to fund a town or city to become a testing ground for the cars.

     
  5.  
    MUSLIM ACCOUNTS 06:36:

    HSBC has told three Muslim organisations it will close their bank accounts. These are the Finsbury Park Mosque in North London, a think-tank on Islamic issues called the Cordoba Foundation based in West London, and a Muslim charity in Bolton called the Ummah Welfare Trust, which works in 20 countries giving aid. HSBC says the decisions were "absolutely not based on race and religion".

     
  6.  
    BANKER BONUSES 06:30: Radio 5 live

    More from Ms Mangwana on Wake Up to Money. She says the proposed seven year rule may be more about changing culture in banking and the way in which bankers view their bonuses. But she also points out bonuses are generally paid in tranches that vest over a number of years, already (commonly anything between three and five years). "That's the current formula and there are [already] mechanisms to reclaim those bonuses," she says.

     
  7.  
    TWITTER SHARES 06:21:
    Twitter

    In case this happened too late for you, Twitter shares rocketed 30% on stronger-than-expected financial results. Revenue more than doubled in the second quarter. Shares rose to $50 in after hours trading. Still down on its high of $74.73, hit in December.

     
  8.  
    BANKER BONUSES 06:10: Radio 5 live

    Samantha Mangwana, employment lawyer at Slater Gordon told Wake Up to Money seven years is a long time to hold a bonus and regulators may well find it difficult to reclaim money. It is highly likely bankers will have gone and spent the money already, she says, and have nothing that the Bank of England can reclaim.

     
  9.  
    BANKER BONUSES 06:07: BBC World News
    Tom Stephenson

    Those new rules on bankers' bonuses are expected to recommend a claw-back period of seven years. Tom Stephenson from Fidelity Worldwide on BBC World News says they could have been tougher: "One of the suggestions was that bankers could be jailed for a significant fall in profits - that's quite something isn't it. Even so, being able to claw back bonuses for seven years is pretty draconian."

     
  10.  
    06:02: Matthew West Business Reporter

    Good morning folks. It's looking like a busy day today. We also have trading updates from ITV and house builder Taylor Wimpey. As always you can get in touch via email at bizlivepage@bbc.co.uk and on twitter @bbcbusiness

     
  11.  
    06:00: Rebecca Marston Business reporter, BBC News

    Welcome again to the Live page. We're going to be banking heavy. There's Barclays results - in about an hour - and later this morning the Bank of England will release new restrictions on bankers' bonuses, said to be the toughest in the world. We'll see.

     

Features

From BBC Capital

Programmes

  • A digger operated via an Oculus Rift and a controllerClick Watch

    Why controlling a heavy digger with a virtual reality helmet might improve safety

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.