SAN FRANCISCO -- Twitter settled on $26 a share for its initial public offering late Wednesday, above its already higher target range.
Twitter reached the decision after a lengthy debate between the underwriters and company executives.
At $26 a share, the company would raise $1.8 billion and would have a market value of $18.3 billion.
On Monday, Twitter raised its price range to between $23 and $25 a share from an initial target of $17 to $20. The final IPO price is more than 50% higher than the low end of its original price estimate, underscoring the soaring demand from institutional investors.
Twitter could not have picked better timing with its IPO coming as stock market nears record highs and the IPO market surges.
Wedbush Securities analyst Michael Pachter said the IPO price is in line with transactions on the private markets. Twitter traded between $26 and $28 on the secondary markets in September before private trading was halted.
“It reflects the limited supply of stock and the incredible demand for social media in general,” Pachter said.
Twitter is expected to begin trading on the New York Stock Exchange on Thursday under the ticker symbol TWTR.
Twitter is trying to strike a balance between getting the best price and avoiding the missteps of the Facebook IPO in May 2012.
Facebook shares fell on their first trading day -- in part on concern that the underwriters had overestimated the value of the company.
Twitter does not want to discourage long-term investors, some of whom have questioned whether it can wring revenue and profit from its business. But a big pop in first-day trading would suggest that Twitter didn’t raise as much money as it could have.
Columbia Business School professor Moshe Cohen said getting the IPO price right is crucial.
“Twitter is not likely to have strong financials for a long time. It’s Twitter’s job to keep the faith among investors. If the stock starts performing poorly, it makes it increasingly hard to do that,” he said.
During its road show, Twitter fielded questions on whether it can grow its user base, sell more ads overseas and eventually turn a profit.
The company lost $143 million over the last four quarters on revenue of $534 million, according to its most recent filing with the Securities and Exchange Commission. And that means it's a potentially risky deal for investors, Cohen said.
“This is a company that has done very well in revolutionizing the market for the dissemination of information and has played a big role in social networking, but it is also a company that has not successfully pivoted to monetizing this success,” he said. “We don’t know how that is going to happen or how long it’s going to take.”