Twitter, after canvassing professional investors for a week on how much they would be willing to pay for its shares, raised the asking price of its stock by 25% on Monday.
The company said it would value its IPO at between $23 and $25 a share, up from the $17 to $20 range, indicating that it was a popular potential investment. Traditionally, however, the banks advising companies on their public debuts start out with a modest asking price, in the hopes that investors will prove willing to pay more.
Twitter also stopped selling its shares a day early, according to a news report by Reuters. It's common for companies to keep order books open for investors until the day before the IPO, but Twitter plans to close the books on Tuesday at noon, Reuters said. In the traditional signals of Wall Street, that move could be interpreted in two ways: it could indicate either high demand for the shares or that investors are tapped out.
Twitter, which plans to list its shares for the first time on the New York Stock Exchange on Wednesday, can now claim a market value of $13.6bn before its shares have even started trading. The company could raise as much as $1.4bn in the offering.
MKM Partners, a research firm for professional investors, said Twitter will be in the competitive "elite" of tech companies by its market value.
"We look at a [comparison] group including Facebook, LinkedIn, TripAdvisor, Yelp and Zillow," MKM analyst Rob Sanderson wrote in a client note late last week. "These companies are regarded as 'category killers', each with very strong operating momentum, disruptive characteristics and open-ended opportunities."
That doesn't necessarily mean smooth sailing ahead, however. Twitter is facing business challenges from rivals as well as skepticism from investors burned by the Facebook IPO.
Twitter is not seen as a good investment by nearly half of active investors, according to a new CNBC-AP poll out Monday.
"That sentiment is stronger from higher-income respondents; some 56% of those with incomes of $75,000 a year have doubts about its investment prospects," CNBC wrote.
In addition, as Twitter's profile rises, rivals are taking aim at its business prospects. "We presently are involved in a number of intellectual property lawsuits, and as we face increasing competition and gain an increasingly high profile, we expect the number of patent and other intellectual property claims against us to grow," the company said.
Twitter revealed on Monday, for instance, that tech giant IBM has claimed that Twitter has violated three of its patents. The patents involve the presentation of advertising and the process of searching for user contacts.
By striking at Twitter's advertising plans, IBM is striking at the company's heart. Twitter gained 85% of its revenue from advertising in 2012, and an even higher percentage – 89% – in the first nine months of this year. "We generate substantially all of our advertising revenue through the sale of our three promoted products: promoted Tweets, promoted accounts and promoted trends."
Twitter said IBM was not suing, however, and only inviting a negotiation. In its public filing, Twitter said "we believe we have meritorious defenses," although it also said "there can be no assurance that we will be successful" in resolving the dispute.
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