Twitter's founding investor expected to net more than $1bn from flotation

A Billion Dollars

Twitter's estimated $12.8bn (£8bn) stockmarket debut will make a billionaire of its founding investor Evan Williams, who used his profits from selling a previous business to Google to take an early gamble on the microblogging site.

When Twitter comes to market in November, the significant share Williams still holds in the most sought-after Silicon Valley business since Facebook could be worth $1.2bn.

But the biggest winner will be a little-known private equity boss called Suhail Rizvi, who is understood to hold a 15% share worth at least $1.9bn. The son of a psychology professor who moved from India to Iowa at the age of five, he owns the Rizvi Traverse investment firm, which has taken him from Hollywood speculator to Silicon Valley insider.

Rizvi helped Hugh Hefner take Playboy private, invested in the studio behind the Twilight films and bought up the ICM Partners talent agency, which represents Robert Redford, before moving on to technology.

Feverish excitement about the forthcoming float also held unexpected benefits for a bankrupt Boston consumer electronics chain called Tweeter, whose stock rose 1,800% as confused amateur investors piled into the shares. Its stockmarket ticker symbol, TWTRQ, is almost identical to the TWTR short form chosen by Twitter.

More experienced investors on Wall Street welcomed the firm's prospectus as measured and without surprises. "There was nothing that stood out as weak, no unusual metrics that had to be uncovered," said Ryan Jacob, head of tech investment firm Jacob Asset Management.

Advertising experts were more downbeat, warning that turning Twitter into a profitable business would be a challenge. The company lost $70m in the first six months of this year, and despite the scale of smartphone ownership today, the money advertisers spend on the small screen is a fraction of Google's income from its PC-based search business.

"If Twitter is going to be a financial success, it has to monetise its biggest asset – its audience – and fast," said Rupert Staines, European managing director of social advertising specialist RadiumOne. "But it could well struggle to do this. Its environment is not particularly advertiser friendly. Think how quickly tweets appear and then disappear on a timeline; consider the potentially intrusive nature of ads in your conversation stream."

The list of Twitter's early investors, published in its initial public offering prospectus on Thursday, is a heady mix of Saudi royalty, Russian oligarchs, media moguls and technology entrepreneurs, with many of the same players behind Facebook's early funding rounds making a reappearance.

The stake owned by Peter Chernin, the former News Corporation chief operating officer and a longstanding right hand man to Rupert Murdoch, has not yet been disclosed but he is a central figure in its network of backers.

These include a longstanding News Corp investor and Murdoch ally, the Saudi prince Alwaleed bin Talal, who placed a $300m bet on the site in late 2011, having been brought into Twitter's golden circle by Rizvi.

Twitter's most senior employee after chief executive Dick Costolo is Adam Bain, a former News Corp star, who was in charge of selling advertising across its websites, including MySpace, before jumping ship. His shares are worth at least $36m, while Costolo could be sitting on winnings worth $172m including stock options that have yet to vest.

Co-founder and director Jack Dorsey, who claims to have dreamt up the idea for Twitter while at New York University, has held on to nearly 5% of the shares, worth some $490m.

Dorsey, whose day job is at his mobile payments startup Square, built the prototype for the service that now has 200m monthly active users in just two weeks. The coding was a joint effort with Biz Stone, who is not listed as an investor in the prospectus, leading to suggestions that he may already have sold his stake.

Also unlisted is Noah Glass, known as the "forgotten founder", although he is reported to have recently received cash in a settlement with the company.

Another beneficiary is Jim Payne, the chief executive of MoPub, a mobile advertising exchange acquired by Twitter in September in an all shares deal which saw the firm's owners handed an estimated 3% share.

Major Facebook backer Yuri Milner's DST Global investment fund, whose cast of rich Russian followers now own more than 5% of Twitter, having invested in 2011 when the company was valued at $8bn.

Twitter valued itself at $20.62 per share in August, and it is understood there are 620m shares outstanding, although a lower number was disclosed in the prospectus. At the August price, Twitter would float for $12.8bn, nearly 29 times its revenues over the past year. A hefty valuation for a company whose average revenue per user in the latest quarter was 64 cents. By contrast, Facebook floated at 26 times revenues.

Powered by Guardian.co.ukThis article was written by Juliette Garside, for The Guardian on Friday 4th October 2013 20.12 Europe/London

guardian.co.uk © Guardian News and Media Limited 2010

 

Best place to workThe Best Firm of the Last Decade is...

Register for Financial Markets News Alerts