Twitter IPO Price Range: Bloomberg West (10/24)

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Oct. 24 (Bloomberg) -- Full episode of "Bloomberg West." Guests: Tesla Motors co-founder Elon Musk, Wedge Partners' Brian Blair and Tailwind CEO Daniel Maloney. (Source: Bloomberg)

? live from pier 3 in san francisco welcome to the late edition of "bloomberg west" where we cover the global media and technology company shaping our world.

I am emily chang and we focus on the future of business.

Twitter revealing key details about its ipo including the price range in the number of shares offering keying into whether they could be aiming too low to avoid the fate of facebook.

Interest pens down 200 $25 million in funding bringing its current valuation -- pinterest pins down a valuation of $3.8 billion.

Elon musk joins us to talk about that tesla that caught on fire on a washington highway.

First to the lead.

The first anticipated tech ipos since twitter.

In an updated filing, they said they will sell 70 million shares at a price of $17-$20 apiece.

They could see a valuation of about $11 biol.4 billion.

Roach was expected to start next week.

Twitter could officially price this on november 6. cory johnson is an l.a. with more in today's drill down.

But first, i want to get to crawford.

What do you think about the priced first of all?

This would price twitter at $10.9 billion on the high end.

Is that to low?

What the company is going to have to show is how quickly they can grow and at what point they become profitable.

It's not necessarily too low but i think what the company is doing is they are really trying to make this interesting.

They are trying to make this an interesting deal that is going to have sustained demand for the stock going forward.

This is one of those rare times where a company is going public that touches a lot of people.

There are a lot of individual investor interests as well as institutional.

What they are trying to do here is really have what happened with facebook.

You don't want to lay an egg, go out to fight -- too high.

I want to bring in cory johnson now.

Given the size of the twitter offering, what are the chances that what happened with facebook and the nasdaq could happen with twitter?

Are they being overly cautious?

Two things happen and they are both very important but completely different.

The nasdaq systems completely failed and they could not open the stock creating a lot of troubles around the opening.

That was a nasdaq screwup, technological.

They were not prepared for an offering of that size.

This is not an offering the size of facebook.

The other thing that happened is shares fell dramatically from the ipo price.

They fell dramatically afterward and that is dealing with the price of the dom the size of the deal.

There were so many shares of facebook out there that they could not carefully placed them in the hands of people pretending to be long-term shareholders which is what an investment they usually tries to do.

It's not a democratic process.

They give the shares to the clients they want to give the shares to it it's easier for twitter to do it because they're only selling 70 million shares.

-- 17 million shares.

The price of facebook started out at $28-35 and it marched up further until it went out at $38 per share and twitter will try to do the same thing presumably.

Because this is such a smaller offering, the likelihood of a collapse and they're not winning enough interest there is lessened but the investment banks are really going to have to govern that by how many shares they put out and how they price it.

How much higher could the price ago?

Could it go significantly higher?

Or do you think it will be the matter of a dollar or two?

That's what it will come down to as cory just mentioned.

The demand we see leading up to the actual roadshow going through and that a deal ultimately happening, i would expect some a given where they are going out, you could see a few dollars and even more than that if they are able to get sustained interest going forward.

I would suspect that they will get a lot of interest in this going forward.

As was just mentioned, this is not a huge offering.

There may be a lot of demand and i think there will be sustained demand.

I would expect this would creep up the for the offering to the high end of the range and it would go forward from there potentially beyond that, beyond $20. let's talk about some of the other numbers in the amended filing.

User growth is up, 39% year on year.

How does that look to you?

Is great.

It's nice user growth.

Facebook has helped us define how big the world of social media can be.

To their credit, twitter comes out and says that the number is good news for them because it means there is room to grow.

It's either that or bad news because they have not grown that they get.

In terms of valuation, you looking at a very high valuation well over 19 times sales for the basic share count let alone the diluted share count want to include everything else.

Compare that to other companies out there right now, google.

A reasonably expensive stock at 5.9 times sales.

The s&p 500 sold lots of stocks and here we are deeply into a very strong bull market at one point six times sales.

That kind of high valuation at this range, that is taking the mid-prices 1850 as a very high valuation indeed.

To go higher than that, they will have to have a lot of excitement from investors and have a very successful roadshow to sell this thing.

Crawford, what do you think of that?

When you compare, how does this support that potential $10.9 billion valuation?

They're going to have to show sustained user growth.

There are questions about how fast they can grow.

As well they're going to have to show sustained revenue growth and a plan to be able to show they can grow revenue off not only the advertising but other areas as well whether it is what is relatively modest today, data licensing fees, and potentially be able to accelerate their ability to show new areas of growth in areas like analytics.

Again, it's going to be tricky for them.

I cannot emphasize this enough.

This is the kind of an offering that touches so many people and so many people have a relationship with the company.

I think that relationship is going to really tug on the investor heartstrings.

Crawford is totally right.

This is a consumer-facing ipo.

T boone pickens who is older than all three of us combined -- [laughter] cory.

T boone pickens said he knew exactly how many twitter followers he had.

This oil guy talking about this technology stock and it so interesting to him because it represents the future.

It is a consumer-facing technology ipo and the higher valuation on ipo day on what they can do.

Whether they can want to start there is a whole other question.

They will raise a whole lot of money and give themselves some life going forward but it might not he such a great thing for public shareholders.

They're looking to raise 1.4 billion dollars.

What should they spend it on?

From their standpoint, they need to spend it on sustained growth and reinvest in the platform to make sure that they are relevant across the future of media and all of the different media outlets where they play.

While their brand has been very organic, they need to be much more intentional about that.

They need to be driving people to the mobile screen while they are consuming media, while they are interacting with their friends.

That potentially means advertising, new forms of marketing, potentially new places for them to develop apps in areas where maybe they have not done that to date.

Not to mention acquisitions and the idea that they could potentially have to acquire in new segments of the media market in order for them to continue to drive rose new revenue streams.

The key message here is invest to grow.

That way they can continue to capture a larger and larger share of what i will call the reinvention of media of which these guys are a cornerstone player going forward.

How do you think they should spend the money?

To crawford's point, some of it matters how the market treats this thing and i'm cap divided by this idea of, a company that never has had substantial profit but the market is them credit for something they might do sunday, turn a profit.

They have used this stock to pay employees.

They use this to build a bigger business because no one has called them to the carpet for not having a strong business.

They would be smart to use that to their advantage.

One day, someday, the piper must be paid and they have to turn a profit and return free cash flow to investors, like t boone pickens.

Unless crawford is about three years old, i insulted him because he's only 85. a great guy, t boone pickens.

At any age.

[laughter] cory jones got -- trey johnson, editor at large.

We are expecting twitter to price its shares on november 6. it is a tale of two companies.

Both amazon and microsoft are out with earnings today and while the businesses are very if rent, both saw revenues rise.

What's driving their success next.

You can watch us streaming on your tablet, phone, and on

? welcome back to "bloomberg west." i'm emily chang.

Microsoft's reliance on software may be them success.

They had sales climb in the income rose hitting -- net income rose hitting $5.2 billion.

The company is a very different basel -- business model, what is driving their success?

Jon erlichman joins me from los angeles with more.

Here are two tech heavyweights reporting earnings on the same day, but two companies with very different earnings stories.

Or more on that, i'm joined by brian blair who covers both companies four wedge partners.

I was listening to the conference call where chief financial officer amy i would was talking about a "fantastic holiday season up ahead of the surface sales." do you buy that?

I do.

On the surface side, they're putting out some products that are affordable.

It's no longer $500 and up.

They are down to 300 and we are seeing the were numbers for those category so they have a reason to be bullish because it's more affordable in order to compete with some of the offerings, they need to have products that have higher numbers embarrassing a lot of interest in the xbox one.

A are seeing stronger pre-orders but i agree that they are very bullish on the december quarter.

That's the consumer side of the business but when it comes to the actual a guest pie for revenue for microsoft, it is the business that includes server product in microsoft office and they sound pretty optimistic because they are getting people to sign up for long-term commitments.

Is that your takeaway?

The main thing they said right out of the call as they are seeing stabilization in the pc business.

That's not something we've heard from the industry for a long time.

A lot of it is coming from the enterprise.

They are seeing enterprise customer sign up for multi-year deals but just to hear them say stabilization on the pc side is a big deal so they're obviously seeing strength in the server- side, strengthen the cloud offerings.

Let's compare microsoft and amazon.

They can come out with results and it might lose half $1 billion and investors get excited.

What's the deal?

Amazon does a great job conveying to the street that it's good to lose money near term for a longer-term payoff.

One thing they focused on with their call is that they are based on millions of new additions to the amazon prime video service.

It's great to hear them actually quantified what some of these investments are going towards.

They've been losing money.

They lost a little less, nine cents, then the street had estimated.

They are doing a great job of bringing in users to the prime platform and as well to the kindle devices even if there are some big costs causing them to lose money.

For those watching us on television, we were showing people stacking packages at the amazon warehouses.

What i found fascinating is this is a company that had 109,000 employees at the same time last year, they had roughly 81,000. this amazon workforce is exploding even though some of these workers are part-time.

They are moving into so many different areas of business.

I have amazon fresh where you can now order your groceries and they have added more fulfillment centers to get that two they prime shipping from anywhere in the country and they have also seen some international growth and they touched on that in their earnings release and they're making some headway in international markets right now.

That's a nascent area for them and where a lot of growth can come in the future.

Since you cover both microsoft and amazon, which do you think is a better investment?

Right now, microsoft.

A lot of people are very bearish about the nokia acquisition, i think it will be a great thing for them long-term to control the complete hardware to software experience.

There's just a lot of negative sentiment around that acquisition and i think it's going to be a smart about long- term to allow them to compete more closely with the likes of google who are now also doing their own hardware and samsung as well but that's a great acquisition and once it closes we get the details in the first quarter of 2014 for what it means but i think microsoft for that reason.

Thanks, brian blair, from new york.

Emily, he's a microsoft man.

Back to you.

Zynga also reported today, a smaller than estimated lost in the first full quarter under the new ceo.

They reported a net loss of $68,000 of revenue of about $203 million.

In the game purchases were better than expected and they are up in after-hours trading 13%. i also named a new coo.

Could tesla be facing huge profit losses from changes in the zero emission credit policy in california?

That is next on "bloomberg west ." ? this is "bloomberg west." i'm emily chang.

Youtube starting its own music awards and now starting a subscription music service to take on companies like spotify.

Services could start by the end of the year according to those familiar with the matter.

Google invested $50 million in vevo, a company with a big presence on youtube.

The debate and the automotive world has not been whether or not cars would run on things other than gas but which technology would dominate.

Now every major carmaker is going green and plan to put batteries next to gasoline engines.

Matt miller has this look at how ford is leading the charge.

The future is electric.

From the toyota previous to tesla model s, they decided to run cars on batteries -- from the toyota prius.

Volt, leaf, even porsche is making electric vehicles.

One company is leading the charge when it comes to an sourcing battery production.

This is the beginning of the line for batteries.

This is the beginning of the assembly process.

We launched in june 2012 and we have made over 100,000 batteries we are continually changing the process and the product.

For it is building its very own battery on its very own assembly line in michigan.

From this point, it is employee-assembled.

Even tesla get theirs from panasonic, the same company that makes batteries for toyota prius.

A few miles away, manufacturing is flexible enough to build cars running on playain old gas as well as hybrids on the same line.

There's room to grow along with the industry.

If the demand is there, we can grow with it.

For it is not selling out of the alternatives yet, they make up of 16% of global sales, only two percent of ford's run on green energy.

With cutting-edge technology, they are ready and waiting for people to start buying electric.

We will see more plug-in hybrids like the fusion.

Over time, the size of the batteries will become less and we have more infrastructure and we will see more and more electric.

That was bloomberg's matt miller.

We'll be right back with more "bloomberg west" after this quick break.

? you're watching "bloomberg west." i'm emily chang.

Samsung appears to be taking aim at global -- who will glass.

-- google glass.

Samsung originally applied for the patent in march.

Google glass could hit the max market next year.

The latest battle over copyrighted music is taking place in the sky.

Sony has sued united airlines, accusing it of playing music and video on its in-flight entertainment system without sony's permission.

Sony sudan in-flight production company -- sued an inside production company.

Doug steele has been hired to be the vice president.

-- president of tesla.

He has also worked at ford.

Tesla was the focus of a heated debate at a public meeting before the california air resources board.

At issue, the zero emission vehicle credits that are crucial to tesla's business.

Cory johnson is back to explain.

This is an interesting story.

It is something that is not well understood by tesla.

The company does have a gross profit.

The cost of the cars seems to be greater than the cost of making the cars.

Hidden in their revenues is something called the zero emission vehicle credit.

The state of california gives tesla credit for building these zero emission cars.

It is not even one credit per car.

Tesla gets seven credits for every car that they build.

That is a substantial part of their revenue.

Many of those credits come from the fact that tesla has made the claim that they have a battery swapping capability, and it can be a quickly charged vehicle.

By swapping the battery in and out, they can be a quickly charged vehicle which gives him three more credits.

The state of california had a hearing today and discussion about this, because they recognize that tesla people are not able to swap these batteries.

There are no battery swapping stations all around.

They are reviewing whether or not this is appropriate for tesla to continue to get this.

How important to the tesla business model are these credits.


It has been 60% of the gross profits over the course of the year.

60% of their revenues are just 60% of their gross profit.

There is no cost that goes into this, associated costs.

The zero emission vehicle credits over the last few quarters have been well over $150 million.

60% of their gross profits over the course of this year, it's a big deal.

You said this was material to their gross profit.

How material?

Not only 60%. the company has suggested that these will eventually go away, but if they go away faster than they want, it will be harder for them to be in business for a long time.

As a percentage of gross profit, it has been falling.

But we don't know how many credits they sell and a quarter, the price of the credits, or who they sell them to.

The commission did not reach a decision today, and table the matter for further discussion.

They said they will resolve this sometime within the year.

The shareholders' commission said something to the effect of, we don't want to have a hypothetical credit.

She seemed unclear about the fact that these tesla battery swapping things don't actually happen.

Tesla had no comment on the situation, but it is one that we will be watching over time.

Cory johnson, our editor-at- large.

Thank you.

Another problem for tesla.

This video showing a model s sedan inflames.

It went viral.

At the time, tesla defended and says the fire happened after the vehicle's bottom mounted battery compartment was struck by piece of metal.

The national highway traffic safety administration says it is gathering information on the incident.

Sky johnson set down with elon musk in london and ask about the incident.

You have six millimeter thick plates on the bottom of the car, and it punched through that and into the battery pack and crushed several of the battery cells.

It took several minutes, but eventually the cells caught fire.

A few of the modules of the battery pack burned.

That's what happened.

The driver was a birth -- able to pull over to the side of the road, get out.

He has bought another model s. he knows a bit about making cars, and said he was startled.

He was startled by the fire.

Why do you think he was startled?

I don't know.

Vw has thousands of car fires every year.

He says his is safe.

I don't know what the implication of that is.

Vw has fires in their cars every year.

[laughter] that's right.

Lithium iron has been a subject of discussion this year, for obvious reasons, with the boeing story.

Do you think you're going to get extra scrutiny as a result of the technology being used?

You are not a dreamliner.

Nevertheless, do you think the technology is more in the spotlight now?

Whenever you have got a new technology, more tension leads to it than current technology.

The standard of safety is higher for new technology than existing technology.

The issue with the boeing lithium iron pack was not that it caught fire, but that is spontaneously caught fire for no reason.

There was a reason, but he was not as though there was a crash or somebody shot it.

It was in a normal flight and he just caught fire -- it just caught fire.

In our case, it was hit by a large piece of metal and a high- speed.

If that would have punctured a gasoline tank or gasoline supply line, the car would have burned to the ground.

That was tesla ceo elon musk speaking with guy johnson.

The main contractors responsible for the online insurance exchanges faced tough questions from congress today.

? welcome back.

I'm emily chang.

They want to know why has been plagued with technical problems.

Let's take a listen.

You paid lots of money to do this.

Over $500 million of taxpayer money spent to build this website, more money than it cost to build facebook.

Facebook has 700 million users a day.

The site works.

The first five years, they did not spend $500 million.

Peter cook joins us.

Lawmakers were not thrilled with the answers they got today.

Pretty clear.

Democrats and republicans on the house energy and commerce committee very frustrated with the enrollment problems they have seen at

It took some of that frustration out on four federal contractors.

A top executive at cgi federal face the brunt of the questioning today.

Cheryl campbell at knowledge problems with the site, but says things are improving.

How soon will it be until the average american can do health care and get in without any of the glitches, ms.


I have a team of people working around the clock trying to quickly get this resolved.

There is improvement day over day.

I cannot give you an exact date as to when it will be completely dissatisfaction.

How about i guess?

I would prefer not doing that.

I don't like to raise expectations.

After the hearing, i spoke with the chairman of the committee.

He was particularly upset to learn that the first full system tested not happen until two weeks before the website went live.

The contractors said they would have liked more time am a but that decision fell to their clients, the federal government.

Who gets grilled next?

There is a long list of government officials who will face the grilling.

Kathleen sebelius is the star witness.

She is testifying wednesday in front of the panel.

She better come with some answers.

When you spend half $1 billion and you talk about the experience to be as easy as getting an airline ticket or ordering a book on amazon, whatever it is, that is the expectation that was set.

As of now, upton is not calling on sibelius to step down.

That pressure will grow if the problems persist at that website.

Peter cook, our chief washington correspondent, thank you.

Watch more of peter's interview as well as an interview with ben cardin on capital gains, friday at 9:30 p.m. eastern only on bloomberg television.

Carl icahn is pushing for a $150 billion buyback of apple shares.

It addressed a letter to tim cook, urging the company to begin an offer to buy back stock.

The letter follows a meeting that the two had in late september.

Jon erlichman is back now with more.

Icahn getting more aggressive.

He is.

That is his style.

Apple has one of the best problems in corporate america.

It has piles of cash, and the cash keeps piling in, more than what apple needs to run its business.

Last quarter, the company generated close to $8,000,000,000 in cash and operations.

They just unveiled their new lineup of ipads for the holiday season.

There will be more cash falling in.

The question ultimately is, how does tim cook deal with this?

Yes already had dinner with carl icahn -- he has already had dinner with carl icahn.

It would not be too surprising for apple to address this issue when it reports its quarterly results, maybe give a taste of what is coming next.

$60 billion going back to investors in the form of a buyback.

There are all sorts of considerations that a company like apple has to think about, including the fact that something like $100 billion of their cash is overseas.

Bring it back is not always an easy thing to do.

Not everyone agrees with icahn here.

Bill gross tweeted, icahn should leave apple alone and spend more time like bill gates.

If icahn is so smart, use it to help yourself -- people, not yourself.

The folks at twitter are pleased to see that happening ahead of their ipo.

A tweak that was retweeted more than 350 times.

It is important to get a sense on what apple investors, larger investors think about this.

Carl icahn puts forward a number of logical points.

There was a high-profile battle with david einhorn, and there ended up being a bit of a showdown at the company's annual meeting.

You have large pension funds like calpers the came out in support of apple.

You wonder whether we're going to hear more from some of those larger apple investors aside from carl icahn.

Jon erlichman, our senior west coast correspondent, thank you.

Pinterest has pinned down $225 million in funding.

You can also watch a streaming on your phone, tablet, and at

? welcome back to "bloomberg west." i'm emily chang.

The company just unveiled three new apps.

One is a revamped ipad app.

Another is an apt to integrate linkedin profiles with iphone mail and a third is a redesigned pulse app, the newsreader.

Tomorrow the linkedin vice president will be joining the late edition of "bloomberg west" to tell us all about it.

Pinterest just raised $225 million, the bulk coming from fidelity investments.

The internet startup lets people share images of a project by penning them online.

The new round of funding values pinterest at $3.8 billion.

Earlier today i spoke with the ceo danny maloney.

I asked jenny if he thought that -- danny if he thought that pinterest was worth that much.


The beauty behind pinterest is the rich data underlying it.

Pinterest is building something called the interest graph, which is extraordinarily valuable to marketers.

But pinterest barely makes money.

They just started rolling back and advertising product.

How can we be confident they are going to make money down the line?

At some point, they were not making money.

Pinterest has had the right strategy by focusing on user growth first.

That is what you have to do in that type of market.

Now is probably the right time for them to start the advertising tests they are running.

Even without those tests being very mature at this point, there is already anecdotal data from third-party providers including ourselves showing that pinterest is highly effective for brands, and they are seeing a great turn.

It seems like pinterest just raises money.

Is it dangerous to raise money at such a high evaluation -- evaluation -- valuation?

The pinterest executive team knows the numbers better than anyone, and understands the path they are on.

The investors can speak to the valuation better than anyone.

If you look at the evolution of other major internet players, this is not out of line.

You guys help companies expand their presence.

What does that actually mean?

Brands want to understand what is happening on pinterest, what other customers interested in?

Who are their biggest fans?

We help them distill the massive amount of data happening on pinterest down to actionable insights they can use to inform their marketing campaigns on and off pinterest.

The more successful that pinterest is, the more -- the better it is for you, right?


What is the power of pinterest down the line?

Five years from now, how big of a deal will it be?

A very big deal.

It will be a permanent utility in the internet world.

The way you think about facebook creating the social graph and google advancing discovery through search, pinterest will advance content discovery by aligning users' interests.

They will enable the internet to do that to a greater extent as well.

That means all publishers, all marketers, all brands will be able to better align the contents and product they're putting out there with what people want.

Those users will be able to make the connection from their desires and interests to real- life action.

What does it mean for a company like amazon, currently the world's largest e-commerce company.

It is an opportunity for amazon as well.

I'm sure amazon is constantly looking for new ways to grow and reach an audience.

While amazon has some very advanced technology and e- commerce, i see no reason why they should not also be looking to pinterest as a potential gross channel for their own business -- growth channel for their bone business -- own busi ness.

It is time for the bwest byte.

We focus on one number that tells a whole lot.

Cory is in l.a. what have you got?

A double bite.

26.8 times.

If you took all of the stock options twitter has granted and all the options they have given away in acquisitions , that means that twitter is proposing the ipo at 26.8 times sales.

A very big number when you include all of the diluted shares in that calculation.

Do you think it's a reasonable number?

Look, i don't know.

I don't understand is heedless optimism that technology investors will sometimes go into the market with.

They are rewarded over and over again.

But it's a big number, and as we discussed earlier, they're probably trying to jack that number a bit higher.

We will be watching for that.

We're expecting the roadshow to start next week.

They could officially price their shares on november 6. we will be following it every step of the way.

Cory johnson, thank you.

And thank you for watching this edition of "bloomberg west." we will see you ask her tomorrow.

? -- back here tomorrow.


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