Twitter New Valuation

At the top of the range, San Francisco-based Twitter would be valued at 11.8 times estimated sales in 2014 of $1.15 billion, up from about 9.5 times in the initial terms, according to analyst projections compiled by Bloomberg. That compares with Facebook Inc. (FB)’s 11.5 times sales and LinkedIn Corp. (LNKD)’s 12.2 times, the data show. Twitter will have 544.7 million shares of common stock outstanding after the IPO, the filing shows. Including restricted stock and options, Twitter will have about 694.8 million shares outstanding. By that measure, at the top end of the range Twitter would be valued at $17.4 billion.

The company has so far been conservative in its pricing and in its IPO process, choosing to file confidentially with the U.S. Securities and Exchange Commission before making its prospectus public. By raising the price, Twitter is giving in to demand while seeking to avoid a market debut like that of Facebook, owner of the world’s largest social network, last year. As analysts, investors and reporters pored over the company’s prospectus, Facebook raised the price of its offering and ended up in a range that exceeded market demand, causing the stock to drop below the initial price and take more than a year to recover.

IBM Patents

Twitter also disclosed in the filing today that International Business Machines Corp. (IBM) sent a letter “alleging that we infringe on at least three U.S. patents held by IBM, and inviting us to negotiate a business resolution of the allegations,” according to the filing. The patents relate to a networking technique based on common contacts, a way to show advertisements without interfering with an interactive site, and using interconnected computers to reduce Web traffic. Armonk, New York-based IBM, which has been the biggest recipient of U.S. patents for the past two decades, gets about $1 billion a year in licensing revenue. The company rarely files infringement lawsuits. It spent four years talking with Amazon.com Inc. before suing over Internet-commerce related patents in October 2006. The companies settled seven months later with Amazon.com paying an undisclosed amount. Twitter had just nine patents and 95 pending applications as of Sept. 30, far fewer than its competitors or other companies in the industry. The company said that could make it a target for litigation, and it would be limited in its ability to fight back by asserting its own patents.

Twitter is set to price its shares on Nov. 6 and begin trading under the symbol TWTR on the New York Stock Exchange (NYX) the next day. Goldman Sachs Group Inc. is leading the offering, working with Morgan Stanley (MS) and JPMorgan Chase & Co. (JPM)