Popular microblogging site Twitter is looking to raise over $1 billion in an initial public offering (IPO) and will reportedly pay a bankers' fee of 3.25 percent.
The information is courtesy of Bloomberg, which cites "people with knowledge on the matter" as its sources.
Per Bloomberg's sources, Twitter will begin a road show with bankers in the last week of October in a bid to promote the IPO.
Moreover, on condition of anonymity, the publication's sources have also let on that Twitter is "leaning toward" listing on the New York Stock Exchange (NYSE). However, per one of the sources, Twitter is still negotiating with NYSE and Nasdaq on the associated listing fee, as well as the ability to handle the IPO.
Usually, per Bloomberg's data, bankers' fee has been 5.7 percent on an average. This year the average IPO fee globally is 4.5 percent. If Twitter has indeed negotiated for a bankers' fee of 3.25 percent, then it is reflective of the fact that investment banks are agreeable to take millions of dollars less just so that they can land a high-end deal with a major client.
If an investment bank misses out on the Twitter IPO, it could impact its reputation amidst tech clients and affect chances of acquiring future IPOs with smaller companies and start-ups.
"It's a low fee for Twitter to have to pay, and it's a very positive development," said Josef Schuster, founder of IPOX Schuster LLC in Chicago. "It may set a standard that will help companies with future IPOs save costs when they come to market."
On the other hand, when compared to rival Facebook Inc., the bankers' fee Twitter will allegedly pay is higher. In May 2012, Facebook raised $16 billion at its IPO and paid banks just 1.1 percent vis-à-vis Twitter's purported 3.25 percent, but this could be due to the fact that the former is a smaller offering when compared to the latter.
Reportedly, Twitter has taken on board Goldman Sachs Group Inc. as its lead underwriter. It has also hired Morgan Stanley, JPMorgan Chase & Co., Bank of America Corp., Deutsche Bank AG, Allen & Co. and Code Advisors for its IPO.
Twitter, however, is yet to give a price range for its shares or a specific date for the IPO debut. Both Gabriel Stricker (spokesperson for Twitter) and David Wells (spokesperson for Goldman Sachs) refrained from commenting on the matter.
