Twitter Insiders Hold On to Shares in IPO Amid Growth Prospects

Oct. 24 (Bloomberg) -- Twitter is seeking as much as $1.4 billion in the largest Internet initial public offering since Facebook, betting it can convince investors of its ability to turn 500 million tweets a day into profits. Cory Johnson reports on Bloomberg Television's "Street Smart." (Source: Bloomberg)

Twitter Inc. (TWTR) top holders including co-founder Evan Williams, whose stake is worth about $1 billion, are keeping their shares as the company goes public, underscoring their confidence in its growth prospects.

Twitter is seeking to raise as much as $1.4 billion, offering 70 million shares for $17 to $20 apiece, according to a regulatory filing yesterday. At the upper end of the range, Williams, the biggest single shareholder in the short-messaging website, will hold more than a 10 percent stake after the IPO worth $1.14 billion, data compiled by Bloomberg show. Affiliates of Rizvi Traverse Management LLC will hold almost a 16 percent stake valued at $1.7 billion.

By hanging on to their stock, Twitter insiders are showing they’re bullish about the unprofitable San Francisco-based company’s ability to wring earnings out of its more than 200 million users. That contrasts with Facebook Inc., whose investors such as Accel Partners and Goldman Sachs Group Inc. ended up selling more shares than initially planned in that company’s May 2012 IPO, according to filings.

“You don’t see a big owner coming out and selling everything,” Robert Peck, an analyst with SunTrust Robinson Humphrey in New York, said in an interview. “That shows conviction about the long-term prospects of the company.”

Photographer: David Paul Morris/Bloomberg

Twitter Inc. signage is displayed outside the company's headquarters in San Francisco. Close

Twitter Inc. signage is displayed outside the company's headquarters in San Francisco.

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Photographer: David Paul Morris/Bloomberg

Twitter Inc. signage is displayed outside the company's headquarters in San Francisco.

Existing investors may still register to sell shares before the IPO, scheduled to price on Nov. 6. Once the company is public, executive officers, directors and existing shareholders won’t be able to sell their stock for 180 days, or six months, a standard waiting period known as the lock-up. Some non-executive employees may be eligible to sell almost 10 million shares as soon as Feb. 15, the prospectus shows.

Early Investors

Union Square Ventures, which contributed a few million dollars in Twitter’s first investment round in 2007, will have a stake of about 5.1 percent, valued at $557 million at the high end of the price range. Spark Capital, which invested in the company in 2008, will own about 6 percent of Twitter’s shares, worth $648 million at that price. Benchmark Capital Partners LP, which led a $35 million investment in Twitter in 2009, bought another $9.1 million in shares in 2011. Its stake would be valued at $631 million.

In total, Twitter has raised more than $700 million, with venture firm Kleiner Perkins Caufield & Byers committing $200 million in 2010 when the company was already worth more than $3 billion.

More than 50 individuals and institutions own shares through direct purchases, secondary sales and acquisitions, and hundreds more are invested through various funds. That includes Richard Branson, the billionaire founder of Virgin Group; actor Ashton Kutcher; and Saudi Prince Alwaleed bin Talal, people with knowledge of the matter have said.

To contact the reporters on this story: Leslie Picker in New York at lpicker2@bloomberg.net; Sarah Frier in New York at sfrier1@bloomberg.net

To contact the editor responsible for this story: Jeffrey McCracken at jmccracken3@bloomberg.net

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