infoTECH Feature

November 06, 2013

Twitter Preps for IPO

The initial public offering (IPO) of Twitter (News - Alert) is fast approaching, and according to industry insiders, the bigwigs at Twitter are feeling pretty good about the impending launch; at least, they don't foresee a fumble like Facebook's (News - Alert) IPO in their future.

As of Monday, Nov. 4, Twitter upped the price range to the $23 to $25 range, a sign that Twitter expects an aggressive investment strategy in the next few days. The move raises the potential market value of the social media giant by several billion.

Assuming Twitter ends up being priced on the high end of the scale, the company will soon be valued just shy of $14 billion on opening IPO day. If that happens, Twitter will be worth more than many other tech giants, including Zynga and Groupon, but still fall short of Facebook, which is currently valued around $120 billion, and even LinkedIn (News - Alert), which is worth $25 billion.

On the other hand, as one of the social media giants of our time, it's not too shabby, considering Twitter will be a newborn IPO while the others have some experience under their belts.

A little self-love

This is also a signal of just how much money Twitter is planning on raising by itself. Assuming an average IPO offering, that would be $1.7 billion from the company alone. There's no official word on how many shares will be up for grabs, but during a talk with the Securities and Exchange Commission in late October, Twitter estimated around 70 million shares.

But that was back when the offering was in the $17 to $20 range. At the time, some analysts were surprised by the relatively low range, so perhaps Twitter executives took that view to heart.

Twitter has been hard at work talking with investors who have already made share orders, and it may have been those conversations that led to the increase. The company seems to think there will be a big demand for their shares, and there may be.

To this end, Twitter decided to close their order books a day ahead of schedule, confident that their IPO would be a hit. Brian Blau, research director at Gartner (News - Alert), says, "Twitter was reserved in how they approached their IPO and that was a good move on their part. That conservative approach is now paying off for them."

Keeping things in check

"This doesn't seem to be spooking people," Blau says of Twitter's move, and maybe that was their intention all along. With trading beginning in early November, Twitter is prepped for a smooth release and entrance to public offerings. When Facebook got too aggressive with their 2012 IPO, that initial fall shook the foundation of the biggest social media platform, and Twitter doesn't want to repeat that mistake.

Back then, Facebook opted to up the amount of shares to sell before the offering happened. Twitter has also sidestepped that mistake. "They don't want to be another Facebook," Blau says.

Of course, increasing the price range before an IPO isn't strange, since it takes a little while to feel out just how much people want a particular stock. In fact, Twitter comes in at number 16 for the company to adopt just that tactic this year, and it's a rallying sign for some investors as they see the price climb leading up to the first day.

High hopes

Some investors have great expectations of Twitter, even with a little drama such as IBM (News - Alert) accusing the company of patent infringement of late. Twitter's biggest job is luring in new users and actually keeping them; quite a few people have signed up for Twitter accounts they never used.

Putting those skeletons to rest takes tact and skill, and having the best executives at the helm is akin to having the best attorneys when you're facing a legal snafu. When you have the right people in your corner, it can pay off, and Twitter just might be able to put together an IPO that's free of stumbles and feeds hearty investor appetites.

Edited by Alisen Downey

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