Twitter set to make a splash on Wall Street

NEW YORK, United States, Nov 03: Wall Street is al!tter over Twitter, set to make the
most anti"ipated sto"k market de#!t sin"e $a"e#ook in a h!%e test or so"ial media and
the te"hnolo%& se"tor, reports '$()
No oi"ial date has #een set, #!t Twitter appears on a ast tra"k whi"h "o!ld see its
initial p!#li" oerin% pri"ed as earl& as Wednesda& or tradin% on Th!rsda&, a""ordin%
to some reports)
The "ompan& will trade !nder the *TWTR+ s&m#ol on the New York Sto"k E,"han%e,
#reakin% rom the Nasda- market !sed #& a lar%e n!m#er o te"h "ompanies)
There is "onsidera#le e,"itement a#o!t the .(O #e"a!se Twitter is *a !ni-!e prod!"t
that no one "an repli"ate,+ said /i"hael (a"hter, head o e-!it& resear"h at Wed#!sh
Se"!rities) (a"hter and his "ollea%!es said in a resear"h report that the& e,pe"t hi%h
demand)
*We #elieve that the market is likel& to %enerate appetite or more than 01 #illion in
sto"k,+ the& said)
*The simple r!les o s!ppl& and demand s!%%est that #& limitin% the s!ppl& o shares
oered to the p!#li" in its .(O, Twitter will #e !na#le to satis& demand)+
'nd Twitter appears to have learned a lesson rom $a"e#ook2s de#a"le in /a& 3013,
marked #& tradin% %lit"hes, a""!sations a#o!t se"ret inormation and a pl!n%e in the
share val!e or months ater the .(O)
*The $a"e#ook sit!ation last &ear was a pere"t storm o an overheated private market,
a !ll& pri"ed oerin%, a massive amo!nt o shares #ro!%ht to market, all "ompo!nded
#& an histori"al te"hni"al %lit"h,+ said 4o! Kerner, o!nder o the So"ial .nternet $!nd)
*That "onl!en"e o events is not likel& to o""!r a%ain)+
's o its latest !pdate, Twitter will seek to raise !p to 01)5 #illion 6 one tenth the val!e
o the $a"e#ook .(O 6 #& oerin% 70 million shares in a ran%e o 017 to 030)
That is a relativel& small "h!nk o Twitter2s "apital, and implies a market val!e #etween
08)3 #illion and 011)1 #illion 6 a "onservative i%!re "ompared with some o the private
market trades in Twitter so ar)
'nal&sts sa& Twitter, !nlike $a"e#ook, will not lood the market, and that with demand
e,"eedin% s!ppl& the pri"e will rise)
The earl& Twitter investors ma& not %et ma,im!m val!e ri%ht awa&, #!t "o!ld #eneit
over time rom a rise in the share pri"e)
69Star -!alit&, #!t -!estions on moneti:ation69
Twitter does have a star -!alit& that is likel& to !el interest, #e"a!se it is a ke& platorm
or "ele#rities, politi"ians and ;o!rnalists)
.n its investor presentation, the "ompan& !sed (resident <ara"k O#ama2s widel&
retweeted messa%e o *o!r more &ears+ ater his 3013 re9ele"tion, and noted how
a"tivist investor =arl ."ahn2s sin%le tweet a#o!t #!&in% 'pple shares moved the sto"k
market)
' "r!"ial -!estion or Twitter, as or $a"e#ook, is how detl& the "ompan& is a#le to
moneti:e its platorm)
Twitter has some 333 million a"tive !sers aro!nd the world, #!t has lost mone& steadil&
sin"e 3010, a""ordin% to .(O do"!ments) The losses amo!nted to 0133 million on 0>33
million in reven!es in the irst nine months o the &ear)
Twitter makes most o its mone& rom advertisin%, "hiel& in the orm o *promoted
tweets)+ ' re"ent revampin% o its displa& opens the door to #i%%er displa&9t&pe ads)
The investment irm Sterne '%ee notes that *Twitter2s s"ale and deepl& en%a%ed !ser
#ase "reate val!a#le opport!nities or advertisers to levera%e the platorm)+
'nal&sts point o!t that Twitter "an allow "ompanies to advertise or ree, or pa& or
promoted tweets and #eneit rom anal&ti"s that tar%et people #ased on their interests
and proiles)
*Twitter is a ni"he #!siness that will not likel& #e !sed #& ?ever&#od&2 vs) $a"e#ook,
whi"h essentiall& is,+ said a report rom (ivotal Resear"h @ro!p anal&st <rian Wieser)
*Aowever, at the same time we e,pe"t that advertisers will "ontin!e to val!e Twitter or
its !ni-!e attri#!tes and sho!ld "on"eiva#l& allo"ate #!d%ets rom so!r"es intended
towards di%ital %oals)+ Risks o an ?!nproven2 model
<!t the report %oes on to sa& that Twitter a"es #i% risks in"l!din% *a relativel&
!nproven advertiser proposition, the prospe"ts o wild swin%s in investor sentiment,
dii"!lt& s"alin% the #!siness proita#ilit&, r!sh sellin%s at a time when earl& investor
lo"k9!ps e,pire BandC %overnment re%!lations primaril& related to priva"&)+
Twitter plans to raise !p to 01)>#n via its
share sale
Twitter says it has over 200 million active
users but has yet to turn a profit
Twitter has unveiled the price range for its shares when the company lists on the stock
exchange.
In a filing on Thursday, Twitter said it planned to sell 70 million shares priced between !7
and 20 "#!0 $ #!2% to raise up to !.&bn "#'()m%.
The offering represents !*+ of Twitter and values it at as much as !!bn.
,nalysts said the valuation, which was less than forecast, indicated the firm wanted to avoid
the dip in prices that followed -acebook.s listing.
/They.re trying to price this for a very strong I01, ideally creating the conditions for a solid
after$market,/ said 2rian 3ieser of the 0ivotal 4esearch 5roup.
-acebook.s shares were priced initially at *' per share. The stock soared within hours of its
debut to a high of &) but later slumped.
6ome analysts had blamed over pricing of the shares as a reason behind the fall. 7owever,
-acebook shares have since recouped most of their losses and are now trading above the
listing price.
8arnings worries
Twitter.s share sale on the 9ew :ork 6tock 8xchange will make it the biggest internet
company to go public after -acebook.
The microblogging site has seen steady growth since its launch seven years ago.
,ccording to its I01 documents, it now has 2!' million monthly users and )00 million
tweets are sent a day.
7owever, all those users and tweets have not yet resulted in a profit. Twitter made a loss of
(;m in the first six months of 20!*, on revenues of 2)&m.
6ome analysts said that while the lower$than$expected pricing may help its share prices in the
days after the listing, in the long run investors would still need to see the firm make profits.
/The fact that the valuation is lower than expectations, I think was smart by the underwriters.
I think it will help the pop,/ said <ichael :oshikami of =estinational 3ealth <anagement.
/2ut in the end, even for !!bn, the >uestion is can they come up with earnings to
substantiate that number? ,nd it.s unclear that they.re going to be able to do that./
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3hat is Twitter?
,dvertising
,lmost ')+ of Twitter.s revenue currently comes from advertising on its site.
There are three main ways for a company or an individual to advertise on TwitterA by
promoting a tweet that will appear in people.s timelines, promoting a whole account, or
promoting a trend.
Twitter tends to charge its advertisers according to the amount of interaction their content
generates.
6ome analysts say the company has showing strong signs of growth, with revenue rising from
Bust 2'm in 20!0 to *!7m by the end of 20!2.
1ne research firm, e<arketer, has even estimated that Twitter.s revenues from advertising
sales will increase by more than !00+ by the end of this year.