Twitter to be valued at $11B at IPO, hires head of news
Seeking to avoid a repeat of Facebook Inc's much-maligned public debut, Twitter Inc revealed more modest ambitions, saying its initial offering would raise up to $1.6 billion and value the company at up to about $11 billion.
The valuation was more conservative than the $15 billion some analysts had expected for the social media phenomenon, potentially attracting investors who might consider the money-losing company's listing price a better deal, with room to rise.
Twitter had signaled for weeks it would price its IPO modestly to avoid the sort of stock plummet that spoiled Facebook's coming-out party. It said on Thursday it intends to sell 70 million shares between $17 and $20 apiece, raking in up to $1.4 billion for the company.
If underwriters choose to sell an additional allotment of 10.5 million shares, the offer could raise as much as $1.6 billion.
Twitter's offering will be the most high-profile Internet IPO since Facebook's May 2012 debut, when the social network giant's shares fell below their offering price and did not recover until a year later. Still, the modest pricing doesn't obscure questions about Twitter's profitability.
"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 Weath Management.
"But in the end, even for $11 billion, 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."
At a roughly $11 billion valuation, Twitter would be worth more than Yelp Inc and AOL Inc combined, but only a fraction of tech giants like Google Inc and Apple Inc, worth $342 billion and $483 billion respectively. Facebook's market value is now $128 billion.
Twitter and its underwriters begin a two-week road show to woo investors next Monday in New York, with stops in Boston and the mid-Atlantic region before touching down in Chicago, San Francisco, Los Angeles and Denver, according to a source familiar with the offering.
"They're trying to price this for a very strong IPO, ideally creating the conditions for a solid after-market," said Pivotal Research Group's Brian Wieser, who valued the company at $19 billion.
The company could choose to raise the price of the offering during that period as it gauges interest. Twitter is expected to set a final price on November 6, according to a document reviewed by Reuters, suggesting that the stock could begin trading as early as November 7.
Sam Hamadeh of PrivCo, a private company research firm, said Twitter could raise the price range and also the amount of shares being sold. But, he added: "Raising both the price and the size was Facebook's fatal mistake."
Twitter's debut will cap seven years of explosive growth for an online messaging service that counts heads of state and major celebrities among its 230 million active users - but still operates at a loss.
Twitter will sell roughly 13 per cent of the company in the IPO and will have 544,696,816 shares outstanding after the offering. That figure could rise given the exercising of options, restricted stock units and the issuance of shares for compensation after the IPO.
The company plans to list its stock under the "TWTR" symbol on the New York Stock Exchange.
Among the biggest Twitter shareholders selling in the offering is Rizvi Traverse, a fund managed by secretive Connecticut-based investor Suhail Rizvi, who has quietly amassed a 17.9 per cent stake in Twitter with the help of Silicon Valley investor Chris Sacca.
Rizvi's stake will fall to 15.6 per cent of total shares outstanding after the sale. JP Morgan Chase, which obtained Twitter shares through Rizvi and Sacca, will see its stake fall to 9 per cent from 10.3 per cent.
Twitter co-founder Evan Williams, the largest individual shareholder, will reduce his stake to 10.4 per cent from 12 per cent, while Chief Executive Dick Costolo will emerge with a 1.4 per cent stake, compared with 1.6 per cent currently.
Co-founder Jack Dorsey will also sell shares, as will early venture capital investors Spark Capital, Union Square Ventures and Benchmark Capital.
Because many early shareholders, including Williams, previously sold parts of their stake to other investors like Rizvi, Twitter's relatively fractured ownership structure looks markedly different from the likes of Facebook and other tech companies dominated by their founders.
When Facebook went public last year, founder and chief executive Mark Zuckerberg kept 57 per cent of the company's voting shares, thanks to a scheme that gave him twice the voting power of ordinary shareholders.
Following Twitter's IPO, Costolo will be under pressure to improve its money-making ability. The eight-year-old company more than doubled its third-quarter revenue to $168.6 million, but net losses widened to $64.6 million in the September quarter, it disclosed in a filing earlier this month.
This month, Twitter secured a $1 billion credit line from its underwriters including Goldman Sachs, Morgan Stanley, JP Morgan, Bank of America Merrill Lynch and Deutsche Bank.
In recent months the company has aggressively introduced a number of new advertising products, including packages with broadcasters CBS and ESPN that show ads on TV and Twitter simultaneously for the fall TV season.
Twitter has also sought to deepen its relationships with news organizations, which provide much of the content shared on the network. The company said Thursday that it hired NBC News digital executive Vivian Schiller as the head of news.
Hires NBC News exec as head of news
Twitter hired NBC News digital executive Vivian Schiller as the head of news after months of speculation since the social media platform posted a job listing for the position last spring.
"Excited to join @Twitter as Head of News in January. Leaving @NBCNews at year's end. Grateful to my beloved colleagues for 2+ great years," Schiller tweeted on Thursday.
Schiller has been considered the front runner for the role meant to be a liaison between Twitter and news organizations. She did not immediately respond to a request for comment.
Many news organizations use Twitter to reach readers who are increasingly using social media platforms to consume news.
Schiller has an extensive background as an executive in charge of digital news. At NBC News, she served as senior vice president and chief digital officer. Prior to that, she was the CEO of National Public Radio. She left NPR in 2011 after a series of controversies including an NPR fundraising executive who slammed conservatives.
Schiller was also an executive at the New York Times Co, leading day-to-day operations of the newspaper's website.
Twitter also announced on Thursday that it is seeking a valuation of up to $10.9 billion in its hotly anticipated initial public offering.