Twitter is playing it safe by starting with a reasonable initial public offering (IPO) valuation of $10 billion to avoid the drawback Facebook had when it did its IPO in 2012.
The social networking site announced Thursday in a regulatory filing that by selling 70 to 80.5 million shares at $17 to $20 each, it will gain as much as $1.6 billion.
The company’s share count as of September 30 exclude restricted stock units, recent acquisition of mobile advertising form MoPub, and 150 million plus shares related options.
Dan Niles, chief investment officer of tech-focused hedge fund firm AlphaOne Capital Partners, told USA Today, "Twitter is not going to price this thing to get every single dollar off the table. They want to price it so the stock goes up on the first day, at least."
A valuation of $10 billion is "very reasonable, unlike Facebook," he added. "The IPO should go reasonably well."
"They are likely to see a lot of demand for stock that appears to be offered at a discount, while limiting supply to ensure that the deal is oversubscribed," Niles added. "They are making sure they don't make the same mistakes Facebook made."
The company plans to sell 12 percent of itself to the public at $18.50 per share to gain roughly $1.25 billion. More so, if multinational financial services corporation like Morgan Stanley and Goldman Sachs, and other banks guaranteeing the IPO buys a further 10.5 million shares.
On the other hand, existing shareholders, including co-founders Evan Williams and Jack Dorsey, are holding on to their stakes for now. Investors are a bit concerned about Twitter's ability to expand as its user growth has slowed.
Unlike its competitors Google and Facebook, Twitter’s user base is not as extensive on computers and mobile to make aggressive advantages.
