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DealBook: Investment Values Twitter at $8 Billion

July 8, 2011 by Leave a Comment

While Twitter isn’t rushing to go public like some of its larger peers, the microblogging service has no problem luring deep-pocketed investors.

Twitter is in the process of raising $400 million in a deal that values the company at $8 billion, according to two people briefed on the matter.

The financing round, which will be split into two portions, will be led by DST Global, the investment firm headed by the Russian billionaire Yuri Milner. Previous investors, including the venture capital firm Kleiner Perkins Caufield Byers, will also participate, one person said.

A Twitter spokesman declined to comment.

With more than 200 million accounts, Twitter, based in San Francisco, is part of an elite group of social Web start-ups that have flourished in recent years by rapidly attracting users. While peers like Groupon and Zynga are now hurtling toward the public markets, Twitter is holding back.

“I think they’re still trying to find a way to make it into a big business,” said Rory Maher, an analyst for Hudson Square Research.

According to his analysis, the company makes about $200 million a year from online advertising and is close to profitability. At those levels, Mr. Maher said, a valuation of $8 billion — or roughly 40 times sales — is difficult to justify.

By comparison, Zynga, the popular online gaming company, recorded $597.5 million in revenue last year, with a profit of $90.6 million, according to a recent regulatory filing. The company, which has filed to go public, is expected to offer its shares at a valuation near or above $20 billion, which amounts to around 33 times sales.

“It’s a small business,” Mr. Maher said, describing the economics of Twitter. “The ad volume isn’t there. They’re going to have to come up with products that drive more volume for them, and they need to increase the number of users.”

At present, Twitter makes the bulk of its money from an advertising platform that features “promoted tweets.” The program, which was rolled out in April 2010, displays sponsored messages in users’ feeds or keyword searches. For instance, a recent search for “Pepsi” generated a message about a current summer promotion, paid for by PepsiCo.

Founded in 2006, Twitter is also adjusting to a recent management reshuffling. Dick Costolo — a former Google executive who was Twitter’s chief operating officer — ascended to the chief executive job last October. Several months later, Jack Dorsey, who initially came up with the idea for Twitter and was its nonexecutive chairman, became head of product development.

Mr. Dorsey, who is also the chief executive of Square, a mobile payments start-up, has been working closely with Mr. Costolo to improve Twitter’s platform.

Despite its challenges, the company is attracting investor capital, at increasingly ambitious valuations.

In December, Twitter raised $200 million, from Kleiner Perkins Caufield Byers, Spark Capital, Benchmark Capital and Union Square Ventures. The investment back then valued the company at $3.7 billion.

Article source: http://feeds.nytimes.com/click.phdo?i=8b450d8b1eef18343220a77c715854e8

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DealBook: Higher I.P.O. Price Values LinkedIn at $4.3 Billion

May 18, 2011 by Leave a Comment

Reid Hoffman, LinkedIn's chairman, whose stake could be worth nearly $853 million when the company goes public.David Paul Morris/Bloomberg NewsReid Hoffman, LinkedIn’s chairman, whose stake could be worth nearly $853 million when the company goes public.

7:03 p.m. | Updated

A few months ago, LinkedIn’s market debut looked to be relatively modest. Its value on a secondary exchange had stagnated at roughly $2.5 billion.

But LinkedIn — the professional social network that is expected to begin trading this week on the New York Stock Exchange — is defying expectations. On Tuesday, the company said in a regulatory filing that it could raise as much as than $405 million. The offering, which is priced at $42 to $45 a share, values the site at $4.3 billion.

That is a significant improvement in a short time, an increase of more than 30 percent from previous expectations. In early May, the company originally set its range at $32 to $35 a share, or roughly $3 billion. Private shares of the social network recently traded at an implied valuation of $2.5 billion on SharesPost, a secondary market.

“It’s a big surprise,” said Rory Maher, an analyst with Hudson Square Research. “Thirty percent indicates that people are dying to get into this.”

The networking site, which has more than 100 million members in more than 200 counties, said it planned to sell more than 7.84 million shares. The underwriters of the offering have the option to sell an additional 1.176 million shares, depending on investor appetite.

An initial offering allows entrepreneurs and institutional investors a chance to cash out. LinkedIn’s chairman, Reid Hoffman, and its chief executive, Jeffrey Weiner, are both selling a small number of shares and will net an estimated $5.2 million each, assuming the shares price at $45. At that price, his entire stake is worth $852.8 million. Goldman Sachs is expected to be the largest seller, offering the firm’s entire stake of 871,840 shares.

LinkedIn’s improving fortunes signal the swelling demand for the Web’s most promising social media start-ups. Both Groupon and Facebook are expected to go public within the next 12 months. Groupon is said to be talking to bankers about a valuation north of $20 billion. Facebook’s last major financing round, a $1.5 billion investment led by Goldman Sachs, valued the company at $50 billion.

Although a lot of the exuberance around Facebook and Groupon has been widely discussed, a strong showing for LinkedIn on its market debut on Thursday would be a positive harbinger for Internet I.P.O.’s. According to a recent report by SecondMarket, an exchange for private shares, investors expressed the most interest in Facebook, followed by Twitter, Groupon and LinkedIn.

“It’s a good litmus test,” Mr. Maher said. “This is a confirmation that investor demand is really strong. A combination of heavy demand and the lack of supply is really driving this.”

Of the social media giants, Groupon is expected to be next on deck. The group buying site is preparing to file a prospectus within the next two weeks, according to two people close to the company who were not authorized to speak because details of the offering were private.

It remains to be seen how well the shares of Internet start-ups will perform in the public markets. The Chinese social networking site Renren priced its offering on the New York Stock Exchange at $14. While its shares closed at $18 on the first day of trading on May 4, the stock closed Tuesday at $12.73.

Article source: http://feeds.nytimes.com/click.phdo?i=1519fc66580328e4a6bd2bb5ec5c4bb6

Filed Under: Business News Tagged With: , ,

DealBook: LinkedIn Rockets to $4 Billion Valuation

May 17, 2011 by Leave a Comment

LinkedInJin Lee/Bloomberg News

A few months ago, LinkedIn’s market debut looked to be relatively modest. Its value on a secondary exchange had stagnated at roughly $2.5 billion.

But LinkedIn — the professional social network that is expected to begin trading this week on the New York Stock Exchange — is defying expectations. On Tuesday, the company said in a regulatory filing that it could raise as much as than $405 million. The offering, which is priced at $42 to $45 per share, values the site at $4.3 billion.

That’s a significant improvement in a short time. In early May, the company had originally set its range at $32 to $35 per share, or roughly $3 billion. Private shares of the social network recently traded at an implied valuation of $2.5 billion on SharesPost, a secondary market.

“It’s a big surprise,” said Rory Maher, an analyst with Hudson Square Research. “Thirty percent indicates that people are dying to get into this.”

LinkedIn’s improving fortunes signal the swelling demand for the Web’s most promising social media start-ups. Both Groupon and Facebook are expected to go public within the next 12 months. Groupon is said to be talking to bankers about a valuation north of $20 billion. Facebook’s last major financing round, a $1.5 billion investment led by Goldman Sachs, valued the company at $50 billion.

Although a lot of the exuberance around Facebook and Groupon has been widely discussed, a strong showing for LinkedIn on its market debut on Thursday would be a positive harbinger for Internet I.P.O.’s. According to recent report released by SecondMarket, an exchange for private shares, investors expressed the most interest in shares of Facebook, followed by Twitter, Groupon and LinkedIn in the first quarter.

“It’s a good litmus test,” Mr. Maher said. “This is a confirmation that investor demand is really strong. A combination of heavy demand and the lack of supply is really driving this.”

Of the social media giants, Groupon is expected to be next on deck. The group buying site is preparing to file a prospectus within the next two weeks, according to two people close to the company who were not authorized to speak because details of the offering are private.

Article source: http://feeds.nytimes.com/click.phdo?i=1519fc66580328e4a6bd2bb5ec5c4bb6

Filed Under: Business News Tagged With: , ,