Twitter vs. Facebook: Can TWTR avoid disastrous IPO?

Twitter is the first major Web company to go public since Facebook's IPO flop last spring. Here's how the two social media IPOs compare.

Richard Drew/AP
An updated phone post on the floor of the New York Stock Exchange features a Twitter logo. Twitter Inc. will begin trading on the New York Stock Exchange Thursday. The company raised the price range for its IPO Monday morning.

All eyes are on Twitter this week as the company finalizes its IPO and enters the trading floor this Thursday.

Social media companies don’t exactly have the best reputation on Wall Street after Facebook’s disastrous IPO last spring. The company’s overvalued stock fell 44 percent in the first seven months of trading.

Although the company has managed to redeem itself (closing Monday more than $10 above its initial IPO price), Facebook’s become the poster child for what not to do when going public. And that’s not rude to say. Facebook CEO Mark Zuckerberg admits it himself.

“I’m kind of the last person you’d want to ask about a smooth IPO,” Mr. Zuckerberg replied when asked what IPO advice he’d give to Twitter during an interview at TechCrunch Disrupt in September.

Will Twitter, with its new ticker symbol TWTR, avoid Facebook’s fate and redeem social media’s name on Wall Street? 

Here are the similarities and differences between TWTR and FB:

–Both companies raised their initial share price the week of the IPO. Facebook aggressively raised its share price range just four days before its IPO. Similarly, Twitter amended its SEC filing Monday morning, three days before its trading debut, raising its IPO share price range to between $23 and $25 a share, up from the $17 to $20 listed in its initial filing. 

–At its upper range, Twitter would begin trading some 12.5 to 13.6 times its anticipated $1 billion in sales for next year, according to eMarketer. That's a little above the 12 times revenues that Facebook and LinkedIn Corp. are now trading at.

–Demand for its stock is so strong that Twitter plans to stop selling stock on Tuesday at noon Eastern Standard Time, a day early, according to Reuters, quoting unnamed sources. Facebook, by contrast, spent the run-up to its IPO telling institutional investors it was reducing its earnings estimates, even as it raised its share price and the size of its stock offering. As a result, an unusually large 25 percent of the initial buyers of its IPO were individuals. 

–That demand could push Twitter's initial asking price even higher, according to unnamed sources quoted by Reuters. But while Facebook was making money when it went public, Twitter is still losing money. Net losses totaled $64.6 million in the third quarter, triple the losses in the same period a year ago, despite a doubling of revenue.

–Still, Twitter's IPO is much more modest than Facebook. Two days before its IPO, Facebook announced it would sell an additional 84 million shares that ended up valuing the company at a record $104 billion. So far at least, Twitter has not announced plans to increase the number of shares it sells. Even with its new, higher pricing, Twitter's IPO price would make the company worth a much more modest $13.6 billion.

–The investing environment may be a bit more kindly to Twitter than Facebook. Thomson Reuters reports that more than 178 companies have gone public so far has this year, the best year for IPOs in the United States since 2007.  

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