Twitter IPO Takes Company Back to Its Roots
There has been two months of secretive negotiations, eight weeks of headlines and 10 days of investors meeting across eight U.S. cities. Now Twitter has finally announced plans to stop being a public company. It has priced its shares at $26.
Come Thursday, executives mark the launch of public trading at the New York Stock Exchange. Shares attract significant investor interest. The company is determined to not follow in Facebook’s footsteps. After that IPO, the social network saw its shares drop 50 percent. So the issue is more about growth rate than its initial success.
Management is hoping this launch creates a positive atmosphere. Twitter will only be selling a small portion of its shares at first, hoping a favourable reaction will allow additional selling later. Funds from the IPO will be used to finance Twitter’s $2.1 billion international expansion, deal making and operations.
The Twitter shares are expected to bring in significant investor interest, especially as trading brings a build up to the company’s listing. That makes this one of most anticipated IPOs since Facebook’s back in May 2012. As each per share price dollar inched up, Twitter executives have been told that investors will definitely be inclined to sell shares in the weeks following the IPO.
Analysts have also said that Twitter’s current per share pricing plans is going to trade on a higher revenue multiple than Facebook. Ultimately, the company could trade at up to 14.2 times the revenue compared to Facebook’s 10.6. If the stock goes to $35, it could trade at more than 20 times.
This offering is going to be the second largest in the U.S.’s IPO history.
Twitter IPO Ready to Send Sweet Tweet to T. Rowe and Other Early Investors
It is believed that when the Twitter IPO smoke clears, the New Horizons and Growth Stock funds group will be sitting on the throne. They own millions of preferred shares, accumulated for a pittance.
A division of T. Rowe Price Group, New Horizons reported holding almost five million Twitter shares purchased at $2.66 per. After the IPO launch, they could be worth in the vicinity of $115 million. Among mutual funds, T. Rowe has been the biggest pre-IPO investor in Twitter.
Another winner in the IPO will be Morgan Stanley Institutional Small Company Growth Fund. They are looking at their original $6 million investment going nine fold. They paid $2.67 per share. Its stake accounts prior to the Twitter IPO accounts for about 2.2 percent of all its net assets.
Investing in companies before they go public has always been a smart strategy for mutual funds. Investors believe it gives them a better understanding of executive talent, strategy and potential for innovation and growth. They investigate many opportunities and for every Twitter that sees heavy investment, there are many others that investors passed on.
Pre-IPO investing allows a range of investors to reap gains originally reserved for private equity and venture capital, those shares can spread across dozens of funds within a single mutual fund family. This can dilute the impact of an IPO’s upside and downside on any specific fund.
Goldman Sachs Group is leading the Twitter IPO with JPMorgan Chase & Co. and Morgan Stanley.
- Twitter Resists Investor Frenzy to Avert Facebook IPO Flop Redux (bloomberg.com)