Twitter to list at $32 a share, valued at $17.9b

Twitter to list at $32 a share, valued at $17.9b

Twitter has announced its eagerly awaited public share offering, revealing it will raise at least US$1.82 billion (S$2.2 billion), making a debut at US$26 a share on Thursday on the New York Stock Exchange.

A tweet from the company said it would offer 70 million shares at the listed price, amounting to US$1.82 billion, and give underwriters a 30-day option to purchase an additional 10.5 million shares of common stock, which would take the total value to around US$2.1 billion.

The initial public offering (IPO) assigns a market value of around US$14.4 billion to the company whose messaging service has become an important tool for celebrities, journalists, political leaders and others.

With the over-allotment it would be the second-biggest tech IPO after Facebook's US$16 billion effort last year and ahead of Google's 2004 offer, which raised US$1.92 billion, according to research firm Dealogic.

Depending on the over-allotment, between 12.8 and 14.5 percent of the company's shares will be publicly traded. The rest is held by its founders and a handful of early investors.

Twitter's IPO is the most keenly anticipated since Facebook's last year, with massive enthusiasm for the messaging service which has fast become engrained in popular culture.

Twitter, however, still must convince investors of its business model, having lost more than US$440 million since 2010.

But with 232 million users and growing, it is expected to be able to reach profitability by delivering ads in the form of promoted tweets, and from its data analytics.

The research firm eMarketer estimates Twitter will bring in $582.8 million in global ad revenue this year, and nearly US$1 billion in 2014.

Eden Zoller at the British-based consultancy Ovum said Twitter needs to show it is executing its business plan to reassure investors.

"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," she said in a research note.

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

Zoller said a key is "to keep users engaged while driving advertising revenues. To achieve these objectives Twitter will need to innovate in both services and advertising."

Mark Mahaney at RBC Capital Markets recommended the stock with a target price of US$33, saying it may become "the next Internet utility."

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

"As a public, real-time, conversational and Distributed platform, Twitter is becoming an essential service for consumers, businesses, media companies, and advertisers. Twitter is where events, information, ideas, and fads get reported, purported, distributed, and exploited.

Twitter gets most of its revenue from advertising in the form of "promoted tweets," but has only been doing this for about three years, and the model is not fine-tuned, said Nate Elliott at Forrester Research.

"Marketers' most common objective on Twitter is to build brand awareness. But consumers are most likely to become a fan or follower of a company in social media after they've already bought from that company," Elliott wrote on a blog.

"Twitter must do more to support marketers. Twitter's marketing business is still relatively young... but that business must mature quickly. Marketers say they need more guidance, education, service, and support if they're going to use Twitter successfully."

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