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| Twitter $2.1 billion IPO | |
| Issuer | |
| Size | $2.093 billion |
| Date | September 2013 |
| Adviser | Goldman Sachs |
| Lead left bookrunners | Goldman Sachs |
| Bookrunners | Morgan Stanley, JPMorgan, Bank of America Merrill Lynch, Deutsche Bank |
| return to the Deals of the Year 2013 index | |
Despite the continued appetite for DCM, last year many observers were calling an end to the primacy of fixed income over equity and the expectation emerged that investors would start to rotate allocation towards the equity markets. That was good news for the IPO market, in which there were a number of landmark deals during the year, foremost of which was the IPO of microblogging site Twitter.
If ever there was an example of a company learning from others’ mistakes it is this deal. When Twitter decided to launch its IPO in November last year the ghost of Facebook’s chaotic $16 billion listing in May 2012 was ever-present. The fate of the Twitter listing was, however, in stark contrast to the earlier deal (over which Facebook and its banks now face a lawsuit from a number of pension funds).
Despite its $2.093 billion size, the Twitter IPO could hardly have gone more smoothly. It was the largest technology IPO of 2013 by offer size and market capitalization, but still amounted to a modest free float of 14.8%. It is difficult to overstate the intense public interest in the deal; for this reason Goldman Sachs was the sole bookrunner until immediately before the public filing to avoid the risk of a leak. It was subsequently joined by Morgan Stanley, JPMorgan, Bank of America Merrill Lynch and Deutsche Bank. Overwhelming investor interest in the deal made the decision to list on the New York Stock Exchange rather than Nasdaq – which paid out $62 million to investors after its systems failed during the Facebook IPO – eminently sensible.
Twitter made four confidential filings between July 12 and September 25 and five further filings between October 3 and November 4 after having gone public with a tweet stating: “We’ve confidentially submitted an S-1 to the SEC for a planned IPO” on September 12.
Despite the fact that Twitter lost $134 million in the first nine months of 2013, investors bought into the story that the company is only in the early stages of its long-term potential and has substantial scope for user-base expansion and product development. It achieved 198% revenue growth in 2012 and 102% revenue growth in the first three quarters of 2013.
The initial price range of $17 to $20 proved conservative and was revised to $23 to $25, with the final offer price set at $26. An internal valuation exercise in August concluded that Twitter shares were worth $20.62. With the deal 30 times oversubscribed the bookrunners focused on building a high-quality long-term shareholder base, concentrating marketing efforts on mutual funds. The careful, steady way in which this enormously hyped deal was managed paid off, with a 72% first-day pop to $50.
