Twitter to sell $80M of stock at $9B valuation

Steven Loeb · January 26, 2013 · Short URL:

Social network selling stock to BlackRock in a move possibly designed to delay IPO

Twitter is about to get a big new investment that, if it goes through, will see a significant boost to its valuation and may alleviate some of the pressure on the company to go public. 

Twitter is reportedly brokering a deal that would allow investment firm BlackRock to buy up to $80 million of stock from "a number of Twitter’s early employees," who have not had the opportunity to exercise their share options since Twitter’s last $800m fundraising round in the Fall of 2011, according to a report by the Financial Times Friday. 

If the deal goes through, the investment from BlackRock would hike Twitter's valuation to $9 billion. BlackRock will own just less than 1% of Twitter.

The investment would put Twitter's valuation up 10% since its last fundraising in 2011.  The valuation is lower than the $10 billion to $11 billion valuation Twitter agreed to for two smaller, secondary transactions, which were completed in 2012, however. Twitter will not be raising any new capital at this time.

Since being founded in 2006, Twitter has raised at least $1.16 billion, including a $300 million investment from billionaire investor Prince Alwaleed Bin Talal, the nephew of King Abdullah of Saudi Arabia, in December 2011 and $400 million from DST in August 2011.

What does this mean for a potential Twitter IPO?

Twitter is expected to announce that it is going public at some point in the next year or two, but the social network may be using this move to delay its initial public offering.

By offering employee shares to BlackRock, Twitter might be avoiding reaching the 500 shareholder limit that would force it to automatically IPO before it would be fully ready to take such a step. All you have to do is look at what happened to the stocks of Zynga, Facebook and Groupon to see why Twitter would be wary of going public too soon.

Other tech companies, including both Facebook and Groupon, have done deals similar to the one between Twitter and BlackRock in order to delay an initial public offering. And those two companies still went public too early, and their stocks suffered accordingly. 

If Facebook, for example, had waited to prove that it could grow significantly on mobile, and find a way to make money from its advertising arm, before making itself public, its stock may have had a less rocky 2012. 

Groupon is currently trading at $5.27 after closing at $26 on its IPO day. Facebook, which fell to $19.69 in August, 48% below its IPO price of $38, has been able to prove that it will be able to do both things its stock has begun to rise again. It is currently trading at $31.54 a share.

It is not known at this time whether Twitter is profitable or not, but its revenues are projected to reach $1 billion by 2014. 

Twitter and BlackRock could not be reached for comment. 

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