Twitter is feeling less timid ahead of its imminent initial public offering according to David Gelles and Vindu Goel.
On Monday morning, the company said it had raised the price range for its I.P.O. to $23 to $25, signaling the company’s bullish outlook ahead of its trading debut on Thursday.
The new price range increases Twitter’s potential market value. At the high end of the range, Twitter could be valued at $13.9 billion, including options and restricted stock units.
The new range also increases the amount of money the company is likely to raise for itself. At the midpoint, the offering would raise about $1.7 billion for the company, giving it an infusion of capital to finance its growth. Twitter still intends to sell 70 million shares in its debut.
On Oct. 24, the company said it planned to sell 70 million shares at $17 to $20 each. That range was below what some analysts had expected, a sign that Twitter was proceeding cautiously and did not want to inflate expectations.
But coming ahead of pricing for the company’s stock, the higher price range suggests Twitter is emboldened after the conclusion of its road show. Thanks to the strong demand for its stock, Twitter is planning to close the order books for its I.P.O. on Tuesday at noon, a day earlier than scheduled, according to people familiar with the matter.
Twitter still plans to price on Wednesday and begin trading on Thursday.
The new price range also signals that Twitter is unconcerned it will make one of the same mistakes that hampered Facebook‘s I.P.O. last year, when the rival social media company priced its shares too aggressively, contributing to an initial fall in its share price.
The price increase comes after a round of bullish reports from Wall Street in the last few weeks. Brian Wieser, a senior research analyst at Pivotal Research who follows the advertising industry, recently set a target of $29 a share for Twitter, based on its long-term revenue potential.
“If you’ve got a social strategy, Twitter is one of the most effective ways to activate that,” he said in an interview on Sunday, before Twitter increased its price range. “What they’ve got is unique and not replicable in any sense.”
Richard Greenfield, an analyst with BTIG Research, who had advised clients very early Monday morning to buy Twitter at $17 to $20, quickly updated his analysis after Twitter raised the range.
“We would participate within the $23-$25 range, albeit, simple math would dictate that management should price at the bottom-end of the new range,” he wrote to clients. He said he still sees the stock reaching $30 over the next year.
Mr. Greenfield has high expectations for Twitter’s revenue growth, expecting the company to go up from $636 million this year to $1.1 billion in 2014 and $2.7 billion in 2016. “We expect a lot of growth ahead in advertising and Twitter ad products.”
He cautioned that Twitter must still do a better job of attracting and retaining new users.
“In our experience, very few people, whether tech savvy or not, truly know what to do with Twitter on an everyday basis,” Mr. Greenfield wrote. “But Twitter users who build out their interest graph are insanely addicted.”
In the amended S-1 filing with the Securities and Exchange Commission, Twitter also disclosed that it was being accused of patent infringement by IBM.
IBM claims that Twitter infringes on three of its patents, including one related to online advertising, and has invited a settlement. Twitter said it believes it can defend against the claims.
Although Twitter is involved in several intellectual property lawsuits, it has largely avoided becoming ensnared in the patent wars rankling Silicon Valley. With a large cash pile from its I.P.O. coming soon, however, it may feel more pressure from competitors on the patent front, and be prompted to become more aggressive in bolstering its own patent portfolio.
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