Judging by the papers filed to date, the company looks set to be floated on the New York Stock Exchange around the second week in November. In 2011 Twitter organised funding from private investors which saw it raise $400 million, effectively valuing the company at $8 billion. This latest announcement points towards Twitter valuing itself around the $11 billion area.
This will be the most eagerly anticipated IPO for a technology stock since the Facebook float on NASDAQ in May 2012. No doubt all concerned will be hoping for a more auspicious start to trading life than Facebook, which suffered after NASDAQ crashed on its opening day.
Like all social media and technology stocks, Twitter will need to find a way to monetise its online popularity while at the same time ensuring that it does not alienate its users. Currently there are over 230 million registered users on Twitter, with an annual increase of 39%. This growth has been assisted by the high number of market-leading individuals who use the platform as a means of communicating to a wide audience; such prolific users include David Cameron (@David_Cameron) Usain Bolt (@usainbolt) and Lady Gaga (@ladygaga).
Revenue figures have been steadily increasing, and in the first nine months of 2013 jumped by 106% to $422 million. However, during the same time period the company also saw losses increase, to $133 million. As user numbers have climbed so too have the running costs, and the firm now employs 2300 full-time staff – up from 1200 a year earlier.
IG has been running a grey market in Twitter since 13 September; between the company's statement about share prices on 24 October and our most recent valuation on 28 October, we have seen IG client accounts revalue the company from $29 billion down to $24 billion. This market capitalisation valuation is derived from our clients’ trading activity, but it still points towards the shares doubling in the first day of trading. Although this is obviously not guaranteed, it is worth noting that IG’s grey market in the Royal Mail IPO correctly indicated how aggressively undervalued the company was before it started trading.
It looks as though the management of Twitter has learned some lessons from the Facebook float, deciding to err on the side of caution by keeping the price and value of the offered stock at a comparatively low level. Investors will be looking upon this as a company with a lot of ‘blue sky’ potential, and as one that is looking for funding to continue its current work and take the firm on to the next stage of the business cycle – hopefully converting that potential into tangible returns.