|Credit : Reuters|
The New York Stock Exchange ran a test of Twitter’s (NYSE:TWTR) eagerly awaited market debut on Saturday with an IPO simulation.
As of now, Twitter is planning to offer 70 million shares at $17 to $20 each, according to regulatory filings. Shares will likely price Wednesday with public trading starting the following day. CEO Dick Costolo is touring the country, making stops in major U.S. cities to ignite interest in the stock. His road show is largely ceremonial given the outsized interest in what will be the hottest IPO since Facebook.
The company will trade under the "TWTR" symbol on the New York Stock Exchange, breaking from the Nasdaq market used by a large number of tech companies.
Critics believe that Twitter is playing it too safe. Current valuations imply a multiple of 9.5 times 2014 sales compared to Facebook’s current 12.9 multiple. That puts Twitter at a 27 discount to its biggest rival. It’s also priced at a 29 percent discount to LinkedIn (NASDAQ: LNKD) that trades at 13.4 times 2014 earnings.
here 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 that the market is likely to generate appetite for more than $1 billion in stock," they said.
That is a relatively small chunk of Twitter's capital, and implies a market value between USD 9.3 billion and USD 11.1 billion -- a conservative figure compared with some of the private market trades in Twitter so far.
"The simple rules of supply and demand suggest that by limiting the supply of shares offered to the public in its IPO, Twitter will be unable to satisfy demand."
And Twitter appears to have learned a lesson 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.