The Lead: Twitter IPO gets pricier, may close a day ahead of pricing
Twitter executives seem to have heard sweet somethings from potential investors in their "road show" last week, as the social network increased the price it expects to reap in a highly anticipated initial public offering, and reports suggested the final price could reach even higher.
Twitter updated its filing with the Securities and Exchange Commission early Monday morning, increasing its proposed IPO price range from $17-to-$20 to $23-to-$25, which could push the company's total take to more than $2 billion. Analysts said Twitter's original price range was conservative, valuing shares lower than the market did for private shares of Twitter this summer.
"To me, it really makes sense," Wedbush Securities managing director of equity research Michael Pachter said Monday, adding that he tracked Twitter shares selling for as much as $28 on the private markets.
Twitter could still price its shares higher than the new range, and Bloomberg News and Reuters reported Monday afternoon that the San Francisco company would choose to boost the price again because of high demand. According to anonymous sources the two news organizations claimed were close to the situation -- gossipy underwriters, maybe? -- Twitter would still be "massively" oversubscribed at the top end of its new range, $25, and will likely price shares higher than that range due to demand.
"They're going to tweak the price range until they get something where demand very slightly exceeds supply," Pachter predicted even before word of a price above Twitter's revised range began to spread.
If Twitter continues to increase its IPO price, it could face similar issues as Facebook, which increased both the price and size of its offering in the week leading up to its IPO, only to fall lower than that price for more than a year after it started trading. While Twitter seems unlikely to offer more shares in its IPO, with no private investors yet to include shares in the offering, many critics and individual investors already considered Twitter stock to be overpriced.
An Associated Press-CNBC poll found that 47 percent of Americans do not believe Twitter is a good investment, with only 36 percent believing it's a good buy. Most negative opinion dwells on Twitter's inability to generate anything resembling profits since being formed in 2006, and Rapid Ratings, which attempts to codify companies' financial well-being, agrees with that view.
"(Twitter has) a nice and interesting base to build upon, but an exciting business with lots of users doesn't necessarily generate returns," Rapid Ratings CEO James Gellert told the Associated Press.
Twitter scored 19 of a possible 100 in Rapid Ratings' scale, which gave Facebook a score of 73 and Google (GOOG) a score of 80 ahead of their IPOs. Geller said that 9 out of 10 companies that score lower than 40 eventually default on debt.
Bloomberg News pointed out that Twitter would rank in line with Silicon Valley's other big names in social media in terms of valuation measured against prospective earnings at the top of its proposed range. Data showed that Twitter would be worth 11.8 times its estimated 2014 revenues at $25 a share, while projections put Facebook at a multiple of 11.5 and LinkedIn at 12.4. Going just $1 higher for its shares puts Twitter near to LinkedIn's level, 12.3, and more would put it well above its two competitors.
The rising price seems to be turning off some investors -- "We definitely won't place an order for as many shares," Chris Carter, co-manager of the Buffalo Growth fund, told the Wall Street Journal -- but others still believe Twitter's trajectory is worth the extra initial price.
"This number is still a reasonable and doable valuation, and I don't think it's going to turn people off," Greencrest Capital Management analyst Santosh Rao told Bloomberg. "We've seen this before, where companies start off with a low number to get people interested, and then work higher. The demand is there as this is the last of the big three social networks to go public."
SV150 market report: Green stocks grow fast ahead of earnings
Wall Street moved slightly higher Monday, with Silicon Valley stocks pushed by very strong performances from the three companies that comprise the SV150's cleantech sector.
Tesla Motors (TSLA) took a big jump, gaining 8 percent to $175.20 on hopes for the Palo Alto company's earnings report, which is set to be released after the market closes Tuesday. After Tesla's stock was battered amid reports about fires involving two Model S sedans in the past month, analysts said rumors about a high number of car sales in the past quarter started to drive the stock. "There are some high whisper numbers out there," Ben Kallo, an analyst with R.W. Baird, told Mercury News reporter Dana Hull. "Some people on the Street are saying as high as 7,000 cars this quarter."
Tesla CEO Elon Musk's other Silicon Valley company, San Mateo residential solar installation company SolarCity, had an even larger percentage jump Monday ahead of its own earnings report, due Wednesday. SolarCity established new all-time intraday and closing highs, moving as high as $65.30 before closing with a 11.4 percent gain at $60.97 after announcing a plan to scare up more funds. Fellow Silicon Valley solar company SunPower also shot higher, gaining 10.7 percent to $34.16 after the San Jose company announced the acquisition of Davis-based Greenbotics, which makes robots that can clean solar panels, making them more productive.
Elsewhere in the SV150, Apple (AAPL) gained 1.3 percent to $526.75 after the debut weekend of the iPad Air, but the Cupertino company did not announce total sales Monday morning, which likely means sales did not top Apple's record of 3 million iPads in a debut weekend. Facebook dropped 3.1 percent to $48.22 as the Supreme Court declined to hear a case involving the company's advertising practices in which claimants did not receive the proceeds of a class-action suit, though justices did say similar cases may warrant their attention. Netflix (NFLX) gained as the Los Gatos company secured rights to a critically lauded documentary, and Google dropped 0.1 percent to $1,026.11 while investing more than $600 million in a European data center. Outside of Silicon Valley, Blackberry decided to give up on finding a suitor interested in buying the cellphone company and dismissed its CEO; shares fell 16.4 percent to $6.49.
The SV150 index of Silicon Valley's largest tech companies: Up 3.38, or 0.24 percent, to 1,406.25
The tech-heavy Nasdaq composite index: Up 14.55, or 0.37 percent, to 3,936.59
The blue chip Dow Jones industrial average: Up 23.57, or 0.15 percent, to 15,639.12
And the widely watched Standard & Poor's 500 index: Up 6.29, or 0.36 percent, to 1,767.93
Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/jowens510.