Twitter's initial IPO pricing range was considered conservative by most accounts, and the company seems to have taken those observations to heart. It has now raised it to $23 to $25, up from the previous range of $17 to $20. At the midpoints of those ranges, the change represents an approximately 30% increase in pricing. Institutional interest is reportedly high and the order book is already oversubscribed, which could be contributing factors to the move.
Additionally, Twitter may have taken lessons from Facebook's controversial debut, which was considered overpriced. Twitter chose to start off conservatively and is now pricing higher based on interest, which is easier than pricing higher and moving lower. There are plenty of examples of young social media start-ups fetching frothy valuations recently, but it's important for investors to distinguish between hype and solid businesses.
In this segment of Tech Teardown, Erin Kennedy discusses Twitter's forthcoming IPO with Evan Niu, CFA, our tech and telecom bureau chief.