Twitter sets IPO price at USD 26 per share, valuing the company at USD 18.3 Bn

twitter#ipoMicro blogging website, Twitter which is going to debut at the New York Stock Exchange on Thursday, has set its IPO price at USD 26 per share, which is said to be the biggest U.S. technology IPO since Facebook Inc.’s debut last year.

The final IPO price set by the company is above the range of USD 23 and USD 25 a share which was anticipated by Twitter earlier this week.

“The fact that they started with a range, they were able to raise it and they were able to price it above the range means that there was unprecedented demand, lots of demand for this IPO and we’ll see how well they do tomorrow,” said Carol Roth, a former investment banker.

According to an announcement made by the company, Twitter plans to sell 70 Mn shares to the public, with this, underwriters have the option to sell an additional 10.5 Mn shares during the first 30 days, which would take the total value to around USD 2.1 Bn.

The company will start trading on the New York Stock Exchange with the symbol TWTR.

Goldman Sachs is serving as the lead underwriter for the Twitter IPO, alongside Morgan Stanley and JPMorgan Chase.

Though its most anticipated IPO of the year, but however Twitter still need to convince investors for its business model, as it has lost about USD 440 Mn since 2010.

“We’re not as confident the business model will be as broad or as successful as a Facebook or a Google… We still have to see this management team perform and how they act as a public company and we have to see if the advertising initiatives stick,” says Channing Smith, Capital Advisors Growth Fund.

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But, the company is expected to be able to reach profitability by delivering ads in the form of promoted tweets, and from its data analytics. According to a research firm eMarketer, Twitter will bring in USD 582.8 Mn in global ad revenue this year and nearly USD 1 Bn in 2014.

In comparison to Facebook, Twitter gets 65 % of its ad revenue from mobile devices such as smartphones and tablets, which revealed in its IPO documents, which takes it ahead of Facebook, as when Facebook went public it had almost no mobile ad revenue.  Keeping in mind the pitfalls Facebook IPO faced, Twitter seems to have taken all the possible steps to avoid the possibility of any mishap. This includes the decision to make company get listed on NYSE instead of NASDAQ and filing the IPO in a confidential manner initially.

According to a recent poll conducted by AP-CNBC, 49% of the active investors think that Twitter IPO will not be a good investment to make, with 52% of the young adults aged between 18-34 thinking the same. The polls also revealed that Twitter lags far behind in terms of popularity, compared to several other social media sites. Among the Twitter account holders who participated in the research, 47% said that they tweet less than once a day. Also, most Twitter users either don’t notice or click on the promoted content.

The company has shown revenue of USD 169 Mn in the last quarter, with a net loss of USD 64 Mn.

Twitter, right from day one has been an innovation in new digital age. For some Twitter has become a dire need, and some are still learning the birds way to speak. Today, with 232 Mn monthly active users, 400 Mn+ Revenue many think twitter is great but not sure about how it shall make money. Hence it shall be interesting to see how market sentiments work for twitter and respond to its IPO.

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