Twitter shares priced at $26 each

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Media captionNewsnight's David Grossman looks at the friends who started Twitter

Twitter shares have been priced at $26 each, ahead of its debut on the New York Stock Exchange (NYSE) later.

That is above the $23 to $25 range announced on Monday and values the short messaging service at more than $18bn (£11bn).

That makes it the biggest market debut for a technology firm since Facebook went public in May 2012.

Twitter has attracted 230 million users since starting seven years ago, but is yet to make a profit.

Its losses for the third quarter of 2013 increased to $64.6m, from $21.6m a year earlier and a recent poll by Reuters/Ipsos showed that more than a third of registered users do not use the service at all.

'Sweet spots'

Nevertheless there was strong demand for the shares and the company was able to raise the offering price twice.

Some analysts said that investors were excited by Twitter's potential for growth.

"Investors see social media and mobile as sweet spots and it is therefore no surprise that Twitter's IPO is creating so much excitement and is oversubscribed," said Eden Zoller of consulting firm Ovum.

However, she added that "Twitter needs to step up and deliver on the expectations that are fuelling its valuation, and show that it has what it takes to provide a sustainable business model".

The firm has posted an increase in its sales, which more than doubled in third quarter to $168.6m, and it is looking to raise even more revenue from advertisers outside the United States.

Mark Mahaney at RBC Capital Markets said that he expected the firm's shares to rise after listing.

"Just as Google, Amazon and Facebook have become Internet utilities, so too may Twitter," he said.

Image caption SEC chief Mary Jo White has questioned the value of judging companies on user numbers

"As a public, real-time, conversational and distributed platform, Twitter is becoming an essential service for consumers, businesses, media companies, and advertiser."

But the share sale has stoked controversy among those concerned that high-profile internet companies are attracting big investment despite being unprofitable.

Speaking on the eve of the Twitter flotation, Mary Jo White, the chairwoman of the US Securities and Exchange Commission (SEC), questioned whether investors were reading too much significance into the vast numbers of users quoted by companies.

Rich men

She did not mention Twitter by name, but said: "In the absence of a clear description, it can be hard not to think that these big numbers will inevitably translate into big profits for the company. But the connection may not necessarily be there," she said in a speech.

"What if only a fraction of those users are paying customers? What does that mean for future financial results? What if the bulk of the growth in the number of users is in an area where the company has not yet figured out how to turn those users into paying customers? What does that then say about the meaning of user growth rates?"

In the short-term however, Twitter's IPO is likely to make its founders very rich.

Twitter's $18bn valuation includes the value of shares in compensation schemes for employees and other share awards.

Co-founder Evan Williams is the biggest shareholder in the firm with a stake of more than 10% worth more than a billion dollars.

Another of the founders, Jack Dorsey, will also become a very rich man. His 4% stake is worth more than half a billion dollars.

Biz Stone, another co-founder, is thought to have made millions by selling holdings over the last few years.

But Noah Glass, also one of the originals, is believed to have made very little from the company's success.

Twitter is selling 70 million shares, which will raise $1.82bn, for the company.

Unlike Facebook, Twitter has chosen to trade its shares on the New York Stock Exchange.

Facebook's debut on the Nasdaq - traditionally the market of choice for technology firms - was marred by delays and problems with orders.

The NYSE has already tested trading of Twitter's shares to try to avoid any technical hitches.

The shares will trade under the symbol "TWTR".

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