Following the path of its social-networking predecessor, Twitter Inc. increased the possible price of its initial public offering Monday, boosting the proposed price for its first batch of shares to as much as $25.
Twitter initially stated that it planned to price its offering in a range from $17 to $20, which analysts considered low, based on the microblogging company’s internal valuation of its private shares at $20.65. After company executives spent the past week courting potential investors in its so-called “road show,” they seemed to come to the same conclusion as the analysts, boosting the IPO range to $23 to $25. At the top of its new range, Twitter would rake in $1.75 billion at a valuation of nearly $14 billion.
The last social-networking company to go public and receive as much attention as Twitter made a similar move, but went even further. Facebook Inc. increased its initial price range in the week ahead of its May 2012 IPO, despite beginning the process with a much wider price range than is typical, $28 to $35. Besides boosting its range to $35 to $38, the Menlo Park, Calif., company increased the number of shares it offered, with early investors adding 95 million shares to the offering, which helped Facebook break IPO records with a total take of more than $18 billion and a valuation of more than $100 billion.
The twin moves likely contributed to Facebook’s inability to sell for more than its IPO price in the company’s first year on the public markets, however.
“Raising both the price and the size was Facebook’s fatal mistake,” PrivCo CEO and founder Sam Hamadeh told Reuters last month.
Twitter’s move also creates a valuation similar to Facebook and Mountain View, Calif., professional-networking company LinkedIn Corp. when compared with revenues. Bloomberg News data shows that Twitter would be at 11.8 times its estimated 2014 revenues at the top of its proposed range, while projections put Facebook at a multiple of 11.5 and LinkedIn at 12.2.
Twitter did not increase the size of its IPO, which will not include any shares owned by private investors or company executives. The San Francisco company plans to sell 70 million shares and keep all the proceeds for corporate purposes.
Monday’s updated filing also disclosed that International Business Machines Corp. has notified Twitter that the New York tech behemoth believes the social-networking company is infringing on three of its patents. IBM is seeking to settle the dispute by entering into a licensing agreement, but Twitter said in its filing, “We believe we have meritorious defenses to IBM’s allegations.”
Twitter is expected to set a final price for its IPO Wednesday night, and debut on the New York Stock Exchange under the symbol TWTR on Thursday morning.