Wall St ready for Twitter

A crucial question for Twitter, as for Facebook, is how deftly the company is able to monetise its platform. Photo / AP

Wall St is aflutter over Twitter, which is this week set to make the most anticipated stock market debut since Facebook in a huge test for social media and the technology sector.

Twitter - which has made big losses in the last three years - will seek to raise US$1.6 billion ($1.9 billion).

No official date has been set, but Twitter appears on a fast track which could see its initial public offering priced as early as Wednesday (Thursday NZT) for trading the day after, according to some reports.

The company will trade as TWTR on the New York Stock Exchange, breaking from the Nasdaq market used by many tech companies.

There is considerable excitement about the IPO because Twitter is "a unique product that no one can replicate", said Michael Pachter, head of equity research at Wedbush Securities.

Pachter and his colleagues said in a research report that they expect high demand. "We believe the market is likely to generate appetite for more than US$1 billion in stock," they said.

And Twitter appears to have learned from Facebook's debacle in May 2012 marked by trading glitches, accusations about secret information and a plunge in the share value for months after the IPO.

"The Facebook situation last year was a perfect storm of an overheated private market, a fully priced offering, a massive amount of shares brought to market, all compounded by an historical technical glitch," said Lou Kerner, founder of the Social Internet Fund. "That confluence of events is not likely to occur again." As of its latest update, Twitter will seek up to US$1.6 billion - one 10th the value of the Facebook IPO - by offering 70 million shares in a range of US$17 to US$20.

That is a relatively small chunk of Twitter's capital, and implies a market value between US$9.3 billion and US$11.1 billion - a conservative figure compared with some of the private market trades in Twitter so far.

A crucial question for Twitter, as for Facebook, is how deftly the company is able to monetise its platform.

Twitter has 232 million active users around the world, but has lost money steadily since 2010, according to IPO documents. The losses amounted to US$133 million on US$422 million in revenues in the first nine months of the year.

Twitter makes most of its money from advertising, chiefly in the form of "promoted tweets". A recent revamping of its display opens the door to bigger display-type ads.

The Economist reports Aswath Damodaran, a professor at New York University, has built a valuation model that assumes Twitter will scoop up around 5.5 per cent of the online ad market by 2023, giving it revenues of US$11.2 billion.

- AAP