Twitter Said to Pay 3.25% Bankers’ Fee for Market Debut

Oct. 11 (Bloomberg) -- Bloomberg deals reporter Cristina Alesci and senior West Coast correspondent Jon Erlichman break down the bank fees involved in the Twitter IPO, how it differs from the path taken by Facebook and previews the company’s roadshow. She speaks on Bloomberg Television’s “Market Makers.”

Twitter Inc. (TWTR) is seeking to raise more than $1 billion in an initial public offering and plans to pay bankers a fee of about 3.25 percent, people with knowledge of the matter said.

The social-media service will probably start a roadshow with bankers to promote the deal in the last week of October, said the people, who asked not to be identified because the details aren’t public. Twitter, which is leaning toward listing on the New York Stock Exchange, is still negotiating with that exchange and Nasdaq on the ability to handle the IPO, as well as associated listing fees, one of the people said.

Twitter’s ability to negotiate a fee well below the norm for U.S. IPOs -- which have averaged 5.7 percent, according to 2013 data compiled by Bloomberg -- shows investment banks are still willing to take tens of millions of dollars less to land a high-profile role with a large client. Missing out on the Twitter IPO could cost an investment bank in reputation among technology clients and in future IPOs with smaller startups.

“It’s a low fee for Twitter to have to pay, and it’s a very positive development,” said Josef Schuster, founder of IPOX Schuster LLC in Chicago. “It may set a standard that will help companies with future IPOs save costs when they come to market.”

Photographer: Chris Ratcliffe/Bloomberg

A user checks a Twitter feed on a smartphone in this arranged photograph taken in London. Close

A user checks a Twitter feed on a smartphone in this arranged photograph taken in London.

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Photographer: Chris Ratcliffe/Bloomberg

A user checks a Twitter feed on a smartphone in this arranged photograph taken in London.

$12.8 Billion

Twitter’s fees are higher than those paid by Facebook Inc. (FB) because it’s a smaller offering, said two people with knowledge of the negotiations. Facebook raised $16 billion at its IPO in May 2012, paying banks 1.1 percent.

Twitter hired Goldman Sachs Group Inc. as the lead underwriter, which typically earns a bigger cut of the deal.

Globally, the average IPO fee this year is 4.5 percent, according to data compiled by Bloomberg. In 2012, IPO managers in the U.S. earned an average of 4.3 percent in fees, while globally they made 3.7 percent, the data show.

Gabriel Stricker, a spokesman for San Francisco-based Twitter, and David Wells, a spokesman for Goldman Sachs in New York, declined to comment.

Twitter also hired Morgan Stanley, JPMorgan Chase & Co., Bank of America Corp., Deutsche Bank AG, Allen & Co. and Code Advisors for its IPO. The microblogging service hasn’t yet given a price range for its shares or specified when it plans to debut.

Twitter is fairly valued at about $12.8 billion, based on the value of its common stock at $20.62 a share as of August, according to a regulatory filing. There are 620 million shares outstanding, people with knowledge of the matter have said.

Technical gaffes plagued Facebook’s IPO last year on the Nasdaq, and the New York Stock Exchange has been seeking to attract young technology companies away from its rival. While the NYSE missed out on Facebook, the exchange won LinkedIn Corp. (LNKD) and Pandora Media Inc. (P)’s IPOs in 2011.

To contact the reporters on this story: Sarah Frier in New York at sfrier1@bloomberg.net; Jeffrey McCracken in New York at jmccracken3@bloomberg.net; Serena Saitto in New York at ssaitto@bloomberg.net

To contact the editors responsible for this story: Pui-Wing Tam at ptam13@bloomberg.net; Jeffrey McCracken at jmccracken3@bloomberg.net

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