Count on it: Twitter will begin trading above $25 per share.
Twitter has increased the price range for shares for its initial public offering, now setting a range between $23 and $25 — up from between $17 and $20.
Twitter, however, was already going public at somewhat of a discount compared to previous IPOs in an attempt to avoid the same fate of Facebook. Instead of pricing its IPO at a higher price and selling a lot of shares like Facebook did, Twitter is only selling a small number of shares at a price that was originally perceived as a “discount.”
“Subsequently, on November 3, 2013, we and the underwriters determined to increase the estimated offering price range to $23.00 to $25.00 per share,” Twitter said in an updated prospectus filed with the Securities and Exchange Commission. “This revised estimated offering price range was the result of discussions between ourselves and the underwriters following the commencement of marketing efforts for the offering and reflect initial indications of interest from potential investors.”
This is a very common tactic in IPOs when they are oversubscribed. So, it’s not much of a surprise that the IPO was able to bring in more than enough demand to sell those shares in that price range, which valued the company at around $11 billion. Now Twitter can capitalize on that demand by increasing the price for its shares.
At that range, Twitter will raise between $1.8 billion and $2 billion, including the additional shares that Twitter has an option to sell (called a “greenshoe” in industry parlance). That also gives Twitter a valuation of around $13.1 billion at the new midpoint.