Twitter's repricing may cause long term issues
Twitter's recent valuation for its shares at its initial public offer would make it more expensive than another social media giant, Facebook, albeit having only one-fifth of the population.
The IPO share price was increased to between USD 23 and USD25 per share. At the top end of the price range, it would have a capitalization of USD13.6 billion. This would make the company nearly twelve times its estimated sales for 2014. The IPO is already oversubscribed at USD25 per share and a final offer price may be even above the highest point of the price range.
The sudden price increase shows how Twitter had shed its conservative approach to its IPO strategy compared to some of its Internet peers. The company, in its initial plans, had set a price range placing a 27% discount as against Facebook on a price to sales basis. Now, with the new prices, it is forcing possible investors to pay a higher premium for its promise of fast growth.