Twitter is planning to raise between $1.2B and $1.4B in its IPO by selling 70M shares at between $17 and $20 each. This would give the company a market cap of between $9.3B and $10.9B. This appears to be a conservative move by the company since reported prices of private trades are higher than where Twitter has priced itself. This may be a lesson learned from Facebook’s overconfident valuation, which led to a disastrous IPO last year. Shares of Facebook opened at $38 and fell to less than $20 on the first day of trading. Since then shares have recovered and Facebook is sitting nicely at $52.44 as of close yesterday. That being said, a successful IPO would value Twitter at about one tenth of Facebook. Twitter is set to kick off its investor meetings in New York next Tuesday and Wednesday and in Boston next Thursday.
Since the first tweet was sent in 2006, Twitter has grown to more than 230M actively monthly users. Investors may have some serious questions for Twitter’s brass as user growth has slowed in recent quarters. While revenue year on year more than doubled to $422.2M, the company is still not profitable and actually nearly doubled its losses to $133.9M. Twitter also has to find a way to get more money out of its users overseas as they constitute 75% of overall users, but only 25% of revenue.
I want to ask Twitter’s management how they will balance paid tweets and advertisements on user’s timelines without cluttering it up so much people cut back on using the social network. I’m weighing buying Twitter at the IPO, but like many investors I have questions about its potential for revenue and am leery after what happened to Facebook.