How Big Will the Twitter IPO Be?

After months of speculation, Twitter has indeed filed its IPO papers.

Because so many people use it, the Twitter IPO is likely to be the most anticipated initial public offering since Facebook (FB) debuted in May 2012. The question is: Just how big will Twitter’s IPO be?

It won’t be as large as Facebook’s. That we know. Facebook went public with a valuation of $100 billion. Twitter is valued at an estimated $9 billion, according to private sales of the stock to investment group BlackRock earlier this year.

But Facebook wasn’t worth anywhere near $104 billion at the time of its IPO. Its trailing 12-month earnings were only $1 billion, so the stock opened at a ridiculous 104 times earnings. Unprecedented hype and build-up pumped the IPO price up to a number it couldn’t sustain.

We know what happened next. Facebook shares immediately plummeted, sinking from a $38 IPO price to less than $18 a share within four months. It took more than a year for the stock to fully recover.

Can Twitter avoid a similar fate? The hype machine is already churning. Given that fervor, it will be tempting for the company to price its IPO much higher than it’s actually worth.

Based on 2013 revenue, Twitter is worth about 11% of what Facebook was at the time of its IPO. Facebook’s 2012 revenue was $5.1 billion. Twitter’s estimated 2013 revenue is $582 million.

Sales are growing exponentially, however. Twitter’s advertising revenue is expected to more than double this year, from $288 million in 2012. It’s supposed to rise to $950 million next year, and then $1.33 billion in 2015.

Rising revenues don’t translate to profitability, however. How profitable Twitter is will go a long way toward determining how the stock performs once it goes public.

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