Twitter has raised the price of its initial public offering at $26 a share, giving the social network a valuation of $14.2bn – far higher than it was originally targeting.
The company, which is headquartered in San Francisco, had been relatively restrained about its ambitions for its market debut, but increased the price target as it drew closer to going public.
Twitter increases its target range again just days after it raised the range from between $17 and $20 to between $23 and $25. This rapid escalation follows strong demand from investors but it is also likely to stoke fears of a repeat of Facebook’s disastrous market debut in May last year.
Facebook also revised its target price upwards a number of times, just ahead of its IPO, and managed to float at the top end of its range, reports The Telegraph.
However, the shares quickly crashed and took more than a year to recover its lost ground. The episode rattled investors’ faith in the technology sector and sparked fears of a new dotcom bubble. It also triggered a slew of lawsuits against Facebook and its underwriters, including Morgan Stanley and Goldman Sachs, from investors who claimed they were misled about the value of the company. America’s Securities and Exchange Commission also slapped the Nasdaq stock exchange with a record $10m fine for a technical glitch that forced Facebook to delay the start of trading.
On Wednesday, Mary Jo White, chairman of the US financial regulator, warned that growth metrics for tech companies are confusing investors, though she refrained from naming any specific companies.
Twitter has chosen the same banks to manage its flotation but is charting a different course in other ways. It has eschewed the Nasdaq stock exchange, usually favoured by technology companies, and opted for the New York Stock Exchange. It will trade under the ticker “TWTR”.
Shares will not start trading at the opening bell on Thursday. Instead, NYSE is expected to spend upwards of 15 minutes getting everything in order for a smooth start. In high profile IPOs, the shares often jump on opening, so investors will be much more sharply focused on Twitter’s closing price as a measure of its success.
Many investors remain concerned that the company does not make a profit. Twitter doubled revenues to $168.6m in the three months to the end of September, helped by a surge in users accessing the social network on mobile phones. However, net losses widened to $64.6m from $21.6m a year earlier.
The San Francisco business has not disclosed when it expects to move into the black but analysts estimate that it will not do so until 2015.
Twitter’s co-founder, Jack Dorsey, will receive a windfall of up to $720m when the business floats, thanks to his 4.7pc stake. However, he is far from the biggest beneficiary after years of having his shares diluted by additional investments.
According to Twitter’s S-1 he is outflanked by his co-founder, Evan Williams, who holds a 12pc stake, and Peter Fenton, a partner at Benchmark Capital, one of the firms early investors. Mr Fenton owns 6.7pc of the social media business. Twitter’s chief executive, Dick Costelo, holds 1.6pc.
Suhail Rizvi, founder of New York private equity firm Rizvi Traverse Management, has quietly amassed more than 15pc of the company over the past two years, using a number of different investment vehicles.