Friday 15 December 2017

Twitter shares surge 92pc as trading debut raises $1.82bn

Sarah Frier and Lee Spears

TWITTER shares surged 92pc in its trading debut as investors paid a premium for its promises of fast growth.

The shares rose as high as $50 yesterday morning in New York.

The company sold 70 million shares at $26 in its initial public offering, raising $1.82bn (€1.35bn).

The microblogging service picked a price that values it higher than rival Facebook and still drew more interest than anticipated. The San Francisco-based company, which is unprofitable and has one-fifth as many users as Facebook, is benefiting from investors' thirst for companies that will grow quickly in expanding markets like mobile advertising.

"The company did everything to secure the most cash for itself while leaving some money for the IPO buyers," said Josef Schuster, the founder of Chicago-based manager IPOX Schuster. "You need a pop at the opening to leave a good taste with everyone. They did a pretty good job managing the whole situation."

At the IPO price Twitter is valued at $14.2bn, or 12.4 times estimated 2014 sales of $1.14bn, according to analyst projections. That compares with 11.6 times that Facebook is trading at and similar to LinkedIn's multiple of 12.2 times sales.

The pricing puts the onus on Twitter to deliver on its promises of fast growth after earlier pitching shares as low as $17. Chief executive Dick Costolo has rallied investor interest in Twitter's rapid sales curve – with revenue more than doubling annually – even with no clear path to making a profit.

The company received orders for about 30 times as many shares as it offered at the $26 IPO price, a person familiar with the matter said. About eight million of the shares, or 11pc of the total in the IPO, were allocated to retail investors. A typical retail allocation is 10pc to 15pc.

Still, any price over $40 reflects "hype" and makes Twitter too risky of an investment, said Jeffrey Sica of Sica Wealth Management.

"I anticipated a very strong open, but when you start to approach these levels this is absolute froth," he said. "There is nothing supporting this range. I think this is just way, way above what realistically we should be considering a stable open."

Mr Costolo was at the New York Stock Exchange for the stock's debut under the TWTR symbol, along with CFO Mike Gupta and Twitter co-founders Evan Williams, Biz Stone and Jack Dorsey.

Twitter's $1.82bn IPO is almost as much as the $1.9bn that Google raised in its 2004 IPO and makes it the largest IPO by a US technology company since Facebook's debut in May 2012. Goldman Sachs led the sale, working with Morgan Stanley and JPMorgan Chase.

Twitter had sought to avoid the hype that surrounded Facebook's initial share sale last year, leading bankers to overestimate demand for its shares. Twitter filed for an IPO confidentially with the US Securities and Exchange Commission earlier this year, and originally set an offering price range at a discount to its internet peers.

Twitter still needs to deliver on its business model as losses widened to $64.6m in the September quarter from $21.6m a year earlier, and it is unlikely to be profitable until 2015. (Bloomberg)

Irish Independent

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