Twitter is set to launch its initial public offering (IPO) on the New York Stock Exchange (NYSE) later this week and experts are tipping the flotation to be a success.
Technology fund managers and analysts pointed to the conservative valuation on the stock, the growth trajectory of the business and the lessons Twitter has learned from the flawed Facebook float last year as reasons for why the Twitter listing will be successful.
Twitter filed papers with the NYSE on October 24 saying it was looking to raise up to $1.4bn (£865m) by listing 13 per cent of the company on the stock exchange, in a move that would value the company at $11bn (£6.9bn).
The shares are set to be admitted on to the stock exchange on November 7.
Nick Evans, co-manager of the Polar Capital Technology fund with Ben Rogoff, said he liked the business and said “at the right price we would be interested in it”.
Although Twitter has said its shares will be valued at between $17 and $20, which experts said was a conservative valuation, Mr Evans thinks the flotation will be so heavily oversubscribed that the final price may be higher.
He said: “I think there will be a lot of interest. It is likely to be significantly oversubscribed. Then the temptation is to price it above the initial range so that will be key as to whether we support it or not.”
However, Garry White, chief investment commentator at stockbroker and wealth manager Charles Stanley, said he would be surprised if Twitter raised the offer price, even though he expects the flotation to be oversubscribed as well.
He said Twitter was keen to position itself as the anti-Facebook in terms of its IPO, choosing NYSE instead of Nasdaq, which had problems with Facebook’s IPO, and generally taking the opposite approach to what Mr White termed the “over-hyped and over-valued” Facebook listing.
As part of that distinction, Mr White said Twitter would be very keen for the flotation to be successful and would keep the share price low to ensure that.
Mr White compared the Twitter IPO to the recent flotation of a portion of Royal Mail shares on the London Stock Exchange.
He said Twitter would price itself in a similarly conservative way to how the UK government priced Royal Mail, in order to ensure its popularity.
Like the Royal Mail, Mr White said the Twitter IPO was likely to be successful partly because a lot of people would buy the stock based on its recognisable brand name, in spite of not really knowing much about how the business works.
Financial spread betting site IG Index is predicting that Twitter could be even more undervalued than the Royal Mail float was.
Its “grey market” on Twitter, where traders can unofficially buy and sell the shares, has found that investors are currently valuing Twitter at more than $22bn, which suggests the shares could quickly double in value if they are listed at $20 per share.
Although Twitter has yet to post any sort of profit, the experts highlighted its growth potential and its ability to generate revenues from mobile internet, comparing it favourably with Facebook which has struggled to monetise its mobile offering.
Mr Evans said Twitter was a “unique asset” as it was the “last remaining pure social media stock” that had yet to float on the stockmarket, following the likes of Facebook and LinkedIn, which are both major positions in Mr Evans’ fund.
