Twitter is valued at $12.8 billion, according to the documents for the listing of the microblogging social network on the stock exchange, which, although it has revolutionized the way people distribute information, it is still an unprofitable company.
“The valuation is fair despite the lack of quantifiable profit. I anticipate the revenue to grow exponentially as retailers and media begin to explore ways to attract new customers through the use of Twitter,” said Jeffrey Sica, president of Sica Wealth Management in Morristown, New Jersey.
Twitter has made public late last week the listing documents and it plans to raise over $12 billion. This is the most anticipated initial public offering of a technology company after the Facebook IPO.
The valuation would be 28.6 times its $448 million revenue for the past 12 months. LinkedIn (NYSE:LNKD) trades at 21 times its 12-month revenue and Facebook (NASDAQ:FB) trades at 20 times its annual revenue.
“The valuation is pretty full. So what you’re buying is the expectation that they’re going to grow into that valuation,” said David Joy, Boston-based chief market strategist at Ameriprise Financial Inc.
The price of a Twitter share was set at $20.62 and the U.S. company will offer for sale 620 million shares, according to sources close to the situation.
Twitter reported in the first half of this year a net loss of $69.3 million compared to the $49.1 million loss in the same period of last year. The company announced that Twitter has reached by June 30 this year a deficit of $418.6 million. There is no sign so far that Twitter would turn a profit even though it expands globally and offers an advertising platform for companies that want to place their products and services in front of more than 200 million monthly active users. Most Twitter users, around 75 percent, access their account from a mobile device. Mobile advertising counts for 65 percent of Twitter’s revenue.
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