Twitter IPO: Fund managers see poor response

Twitter Inc has set a relatively modest price range for its closely watched initial public offering, but some financial advisers say their clients are not clamouring to invest in the social media phenomenon.

“Nary a tweet,” says William Baldwin, president of Pillar Financial Advisors in Waltham, Massachusetts, when asked about client interest in the deal.

Out of 29 broker-dealers and independent advisers contacted by Reuters,  23 said they are not recommending Twitter shares. Only one said he would recommend it - and only to certain clients. Five others said they would wait to snap up the stock if it plunges after it begins to trade on the New York Stock Exchange.

While retail interest might be low, tech industry analysts say there is expected to be a good appetite for Twitter stock from institutional investors at the current valuation. Actual institutional investor sentiment still remains unclear. Retail investors typically account for 10 to 15 per cent of IPOs.

Twitter said on Thursday it will sell 70 million shares at between $17 and $20 apiece, valuing it at up to about $11 billion, less than the $15 billion that some analysts had been expecting. If underwriters choose to sell additional allotment of 10.5 million shares, the IPO could raise as much as $1.6 billion.

No calls on Twitter

Three brokers with Morgan Stanley, which was lead underwriter on the Facebook IPO, said clients are showing little or no interest in Twitter.

"With the debacle over Facebook, I haven't had one client ask about it," said one of the brokers, based in the southeast. The broker asked not be identified because they were not authorized to speak to the media.

While Twitter relies on advertising like Facebook to make money, it is not profitable.

Twitter also has a smaller, less-engaged audience and it is not issuing as much stock, argues Kile Lewis, co-chief executive and founder of oXYGen Financial, an independent financial advisory firm that focuses on clients in their 30s and 40s, also known as Generation X and Generation Y.

“In spite of the 'glow' from most on Wall Street, I find it hard to make a recommendation for a company that is running a...loss,” Lewis said.

Twitter more than doubled its third-quarter revenue to $168.6 million, but net losses widened to $64.6 million in the September quarter, it disclosed in a filing earlier this month.

Since its creator Jack Dorsey sent out the first-ever tweet in March 2006, the micro-blogging platform has grown to more than 200 million regular users posting more than 400 million tweets a day.

Twitter is expected to set a final IPO price on November 6, according to a document reviewed by Reuters, suggesting that the stock could begin trading as early as November 7.

Poll on price range

For individual investors, however, the pendulum is swinging the other way.

An online poll conducted through Friday morning on Reuters.com found that 57 per cent of 225 respondents want to invest in the IPO at the range of $17 to $20, while 28 per cent are not interested in the stock. Fifteen per cent say they are waiting to buy the shares on the open market.

Several independent advisers said it suited their investment styles more to wait and see how Twitter performed after the offering.