Twitter prices IPO at $26 ahead of stock market debut - USA TODAY

Alistair Barr, USA TODAY

6:52 p.m. EST November 6, 2013

Twitter expects to raise about $2 billion from its IPO. Shares to begin trading on NYSE, under symbol TWTR, on Thursday

The social media giant hit the road Oct. 26, and is visiting six cities to promote its IPO leading up to its first day of trading on the New York Stock Exchange, Nov. 7.(Photo: Tory Hargro, USA TODAY)

SAN FRANCISCO – Twitter priced its shares at $26 each Wednesday, setting the stage for one of the largest technology initial public offerings ever.

Twitter will raise about $2 billion from the IPO. That makes it the fifth-largest U.S. tech IPO ever, just ahead of Google, which raised $1.92 billion in its 2004 stock market debut, according to Dealogic data.

Twitter shares are set to start trading on the New York Stock Exchange, under the ticker TWTR, Thursday. Big first-day gains have been expected.

The $26 price values the micro-blogging service at just over $18 billion, on a fully diluted basis. That valuation is about 16 times forecast 2014 sales, a premium to rivals including Facebook, LinkedIn and Yelp, according to some analysts.

Twitter set an early price range of $17 to $20 for its IPO, which was considered cautious. But there has been strong interest from investors and the company is not selling much stock, leaving an imbalance between supply and demand. That allowed the company and its bankers, led by Goldman Sachs’ Anthony Noto, to raise the range to $23 to $25 and then pick a final price above that.

“This leaves less money on the table,” said Santosh Rao, an analyst at Greencrest Capital.

Rao reckons Twitter is worth $21 a share, or about $11 billion, based on fundamentals such as future revenue and earnings. However, he said there is more at play in hot IPOs such as Twitter’s.

“There’s a supply and demand issue. People have to get involved and they will rush in to try to get shares, which drives up the price initially,” Rao said. “There will be a pop on Thursday probably.”

Twitter shares are expected to jump higher than $40 by the end of the first day of trading, according to IG, a firm that lets investors bet on the performance of IPOs ahead of time.

“But there are enough skeptics on the business model of this company that at some point there will be a sell-off and investors will be able to get in later at a more reasonable price,” Rao said.

Twitter prices IPO at $26 ahead of stock market debut - USA TODAY