Anxious to avoid a scenario that happened with other major internet companies going public before it, including the behemoth Facbook Inc, Twitter has valued its IPO extremely conservatively at only $11 billion. It said the initial offering would raise about $1.6 billion and the company would gain a value of $11 billion more or less.
This was not unexpected of Twitter as it had been very cautious about the IPO following recent history and would have wanted to avoid a plummeting of its stock like what happened with Facebook.
On Thursday, Twitter said that it would be selling 70 million shares between $17 and $20 per share and would raise about $1.4 billion for the company. The sum could go up to $1.6 billion if underwriters decide to sell an additional allotment of 10.5 million shares.
Currently, with a $11 billion valuation, Twitter would be worth less than 1/10th of Facebook’s market value of $128 billion, and a fraction of the worth of other Internet giants like Google and Apple, though, truly speaking, Twitter does not share the same competitive space as those other companies.
Even at $11 billion, Twitter would be worth more than the combined market value of AOL Inc and Yelp, and the question is whether it earnings would be able to substantiate the valuation.
From next Monday, Twitter and its underwriters are expected to begin a two-week road show for investors. The show will travel from New York to Boston and then onwards to Chicago, San Francisco, Los Angeles and Denver.
If consumer interest peaks, then Twitter may change the price of its offering, because it has up to November 6 to finalize prices, before the stock starts selling on November 7.
Twitter currently has more than 230 million active users with a large user base of celebrities and businesses.