Twitter IPO: Grey Market Investors Expect Twitter Shares To Be $43.60 At The End Of Day OneBy: Chris Crum - November 6, 2013
Twitter is expected to announce its final price per share for its IPO this evening, with trading beginning on Thursday on the New York Stock Exchange.
The company already bumped up its price range in an amendment to its SEC filing this week, going from between $17 and $20 to between $23 and $25.
As it did ahead of the Facebook IPO, IG set up a grey market when Twitter filed its S-1. This allows its clients to take a view on what the market cap of Twitter will be after the first official day of trading, but actually trade it with IG.
“This gives a good indication where investors think Twitter should be valued and provides IGs analysts with unique insights ahead of the IPO,” a spokesperson tells WebProNews.
“The current mid-price of $23.75 billion on IGs Twitter grey market indicates investors expect to see a share price of $43.60 at the end of day one,” the spokesperson says. “This is down sharply from nearly three weeks ago, when the expected market cap hit $33 billion, equal to more than $60 a share. The grey market has since leveled off which usually indicates investors believe it has reached a fair value. The same ran true for the UK Royal Mail grey market which indicated investors thought the stock was heavily undervalued.”
IG technical analyst Brenda Kelly says, “This is the largest Silicon Valley IPO since Facebook and underwriters of the floatation will be keen to make this more of a success in comparison. The good news is that extensive hype in advance of the Facebook IPO – blamed to an extent for its less-than-impressive debut on the stock market – has been avoided. The decision to list on the NYSE was also clearly inspired by the disastrous delay in Facebook trading, due to a glitch in the NASDAQ computer. Twitter has announced a range of $23 and $25 for its stock price, which would value the company at $17.4bn.”
“It must be remembered that Facebook was, and is, a much bigger company — it had 900 million users when it went public, and has more than a billion today — and its size was one of its big selling points,” she says. “Also unlike Facebook, Twitter has yet to turn a profit. The company reported a net loss of $79.4 million on revenue of only $316.9 million in 2012. Given its active user base the company does have great profit-making potential, but monetising this potential is a different story – something that early investors in Facebook learned the hard way.”
“An unsuccessful IPO is something that underwriters of the flotation will be keen to avoid,” adds Kelly. “The extensive hype in advance of the Facebook IPO – blamed to an extent for its less-than-impressive debut on the stock market – has been avoided. The decision to list on the NYSE was also clearly inspired by the disastrous delay in Facebook trading, due to a glitch in the NASDAQ computer.”
Twitter is selling 70,000,000 shares.
Image: Twitter (SEC)