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Twitter IPO is "smart" but "beware of the risks"
Twitter finally comes to the market, in what has been the most hotly anticipated IPO since Facebook. Saxo Bank's James Helliwell says the San Francisco-based company's strategy has so far been "smart" compared with Facebook.
Twitter raised the proposed price range for shares in the IPO to USD 23 to USD 25 each, up from the earlier range of USD 17 to USD 20. It has managed to sell 70 million shares at USD 26 each, meaning it raised USD 1.82 billion in its initial public offering.
But James warns the pricing may be too ambitious. In terms of its valuation, using the forward price to sales measure on next year’s anticipated sales, it’s being valued at 12.4 times valued sales – whilst Facebook is trading at 11.6. This means the market is "clearly pricing in a premium based on future expectations".
Will it be able to meet those expectations? For James, when it comes to Twitter, the key word is long term. The company is only expected to become profitable in 2015, so "there’s certainly risks in the short term".
Twitter’s loss widened to USD 64.6 million in the September quarter from USD 21.6 million a year earlier.
But he does add Twitter has potential, as 70 percent of Twitter’s revenue come from mobile users as opposed to desktop users, which is much higher than Facebook.
The will trade under the symbol TWTR, listed on the NYSE.
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