Twitter seeks to raise up to $1 billion in IPO

Twitter Inc yesterday revealed plans to raise up to $1 billion in an initial public offer (IPO), giving the still unprofitable microblogging site a suggested valuation of around $12.5 billion.

In the most anticipated technology IPO since Facebook, Twitter yesterday said in its prospectus that it is seeking to raise $1 billion through issue of shares valued at $20.62 each.

With around 620 million shares outstanding, the pricing of the shares takes the value of the San Francisco-based company to around $12.5 billion.

Goldman Sachs is the lead underwriter and is backed by Morgan Stanley, JPMorgan Chase & Co, Bank of America Corp, Deutsche Bank AG, Allen & Co and Code Advisors.

Twitter, which generates around 65 per cent of its revenue from mobile advertising, revealed that revenue more than doubled to $254 million in the first six months of this year, but net loss grew by 40 per cent to $69 million from a net loss of $49.1 million in the same period a year ago.

Twitter, one of the ten most visited websites, said in the prospectus that it had 218 million average monthly active users in the second quarter, up 44 per cent from the same period a year ago.

Twitter said the proceeds from the IPO would be used ''to increase our capitalisation and financial flexibility, create a public market for our common stock and enable access to the public equity markets for us and our stockholders.''

The IPO will make Twitter's early employees and investors in the company rich, with Evan Williams, one of the company's founders, whose 12 per cent stake now valued at $1.2 billion, while Jack Dorsey, another co-founder, holds 4.9 per cent stake worth around $480 million.

Investment firms Benchmark Capital, Union Square Ventures, Russia's DST Global and Spark Capital hold substantial stake in the company.

But Twitter's chief executive officer Dick Costolo would need to convince investors that the offer would fare better than internet IPOs from Facebook, Groupon Inc, and Zynga Inc, which all ended up losing half their value within six months of their listings.

Some social media stocks though had done better though, with LinkedIn soaring to almost $250 a share from its $45 offer price in May 2011. Yelp was up 325 per cent since its March 2012 IPO, although Groupon was down over 41 per cent since its public debut in November 2011.

Twitter's IPO, though much smaller than Facebook's, could still generate tens of millions of dollars in fees with the underwriting mandate alone.

Twitter, whose shares could debut in November, may start its road show in late October.