Twitter Inc's IPO could be volatile on Thursday on the New York Stock Exchange, analysts said, but they remained enthusiastic after the money-losing social media company priced its IPO above the expected range, according to Reuters.
Twitter, a microblogging network, priced 70 million shares at $26 on Wednesday evening, above the targeted range of $23 to $25, which had been raised once before. The IPO values Twitter at $14.1 billion, with the potential to reach $14.4 billion if underwriters exercise an over-allotment option.
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If the full overallotment is exercised, as expected, Twitter could raise $2.1 billion, making it the second largest Internet offering in the U.S. behind Facebook's $16 billion IPO last year and ahead of Google Inc's 2004 IPO, according to Thomson Reuters data.
The focus now turns to the first day of trading, with some analysts expecting a small price pop. Even with the share price increase, Twitter has approached its offering more cautiously than Facebook, which raised both the price and the number of shares offered before its IPO only to see the price fall substantially at the outset.
Twelve-month price targets on Twitter's stock range from $29 to $54.
Brian Wieser, an analyst at Pivotal Research Group who valued Twitter this week at $29 a share, said the stock appears to have strong institutional investor support and could easily close over $30 a share on its first day.
But he warned that trading could be volatile, given that Wall Street has struggled to value an unorthodox social media company with a newfangled business model.
"There's still so much uncertainty and it's so difficult to even identify how big the opportunity is," Wieser said. "Twitter will make Netflix look like General Electric as a bellwether of stability."
Twitter boasts 230 million global users, including heads of state and celebrities, but it lost $65 million in its most recent quarter and questions remain about long-term prospects.
It also lacks the ubiquity of Facebook or the "stickiness" factor that keeps people checking the No. 1 social network on a daily basis. A Reuters-Ipsos poll last month showed that 36 percent of people who signed up for a Twitter account say they do not use it.
Moshe Cohen, a professor at Columbia Business School in New York, said pressure on Twitter could quickly mount if shares lose steam out of the gate.
"Twitter, as a company with no expectations of making profits for several years, needs its investors to have faith," Cohen said. "If that stock starts to show some negative momentum from the beginning, it could last for a while."
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