Software // Social
News
9/12/2013
06:58 PM
Connect Directly
LinkedIn
Twitter
Google+
RSS
E-Mail
50%
50%

Twitter Prepares IPO, Facebook Pain In Mind

Twitter confidentially files an S-1 document with the SEC, preparing to go public. Can it avoid the criticism that followed rival Facebook's IPO?

Twitter on Thursday said it has filed documents with the Securities and Exchange Commission for an Initial Public Offering.

The long-expected announcement arrived, appropriately enough, as a tweet.

The fact that the filing is confidential indicates that Twitter is seeking to go public as an "emerging growth company." The SEC says emerging growth companies generally have less than $1 billion in revenue. Twitter's prospectus can be expected to provide more specific figures.

Recent estimates have put Twitter's value at around $10 billion. In February, The Wall Street Journal estimated Twitter's value at $12.5 billion. In May, GSV Capital, which owns a stake in Twitter, put Twitter's value at $9.8 billion.

[ Twitter is on a roll. Read 4 Ways Twitter Is Beating Facebook. ]

Facebook when it went public last year priced its IPO shares at $38, giving itself a valuation of more than $100 billion. It took more than a year for investors to agree with that valuation.

As an emerging growth company, Twitter will not be subject to the same disclosure and reporting requirements faced by larger public companies. For example, it can implement accounting requirement changes as if it were a private company. It won't be required to have auditors assess its financial controls annually. And it won't have to disclose as much detail about executive compensation as a larger public company or give shareholders a say in executive compensation decisions.

Also, brokers and dealers who provide research reports on Twitter to potential investors will not be required to provide as much detail as is contained in the prospectus filed with the SEC.

Nikhil Varaiya, director of graduate programs and professor in the finance department at San Diego State University, said in a phone interview that Twitter's timing appears to be good. "This might be a good opportunity," he said. "The window looks like it might be receptive."

Noting that Twitter appears to be growing in popularity and to be viewed favorably by users, he expects enormous demand for shares. But he cautioned that small investors might be wiser to hold off until the stock has stabilized. He pointed to the time it took for Facebook shares to return to their IPO price.

Darren R. Hayes, a computer science professor at Pace University in New York and a former investment banker, agreed in a phone interview that Twitter appears to have chosen to go public at the right time.

"The general market conditions are not unfavorable," he said. "It may be a good time for Twitter to go public. There doesn't seem to be too much negative information about the macroeconomic climate."

Hayes suggests a repeat of the Facebook IPO disaster is unlikely. He blames the underwriter rather than the company itself for failing to attract enough support from institutional investors. He also notes that concerns about Facebook's growth had been raised when GM publicly distanced itself from Facebook advertising (only to return a year later).

Hayes says that a concern among investors in social media companies is that company business models may be vulnerable to being copied. He doesn't see that as an issue for Twitter in the near term, but he says it's something to consider for any social media company.

Comment  | 
Print  | 
More Insights
Comments
Newest First  |  Oldest First  |  Threaded View
Cara Latham
50%
50%
Cara Latham,
User Rank: Apprentice
9/13/2013 | 6:48:03 PM
re: Twitter Prepares IPO, Facebook Pain In Mind
Does this mean the current user experience will decline in quality as users are bombarded with more ads -- similar to what happened with Facebook?
Thomas Claburn
50%
50%
Thomas Claburn,
User Rank: Author
9/13/2013 | 4:51:56 PM
re: Twitter Prepares IPO, Facebook Pain In Mind
Ads and data. It already brings in something like $500-$600 million in revenue annually.
RobPreston
50%
50%
RobPreston,
User Rank: Author
9/13/2013 | 1:50:51 PM
re: Twitter Prepares IPO, Facebook Pain In Mind
There's one big question: What is Twitter's path to profitability?
David F. Carr
50%
50%
David F. Carr,
User Rank: Author
9/13/2013 | 1:44:41 PM
re: Twitter Prepares IPO, Facebook Pain In Mind
Perhaps the Facebook experiment will moderate expectations for Twitter, giving them a better chance of living up to their billing.
Social is a Business Imperative
Social is a Business Imperative
The use of social media for a host of business purposes is rising. Indeed, social is quickly moving from cutting edge to business basic. Organizations that have so far ignored social - either because they thought it was a passing fad or just didnít have the resources to properly evaluate potential use cases and products - must start giving it serious consideration.
Register for InformationWeek Newsletters
White Papers
Current Issue
InformationWeek Tech Digest - July 22, 2014
Sophisticated attacks demand real-time risk management and continuous monitoring. Here's how federal agencies are meeting that challenge.
Flash Poll
Video
Slideshows
Twitter Feed
InformationWeek Radio
Archived InformationWeek Radio
A UBM Tech Radio episode on the changing economics of Flash storage used in data tiering -- sponsored by Dell.
Live Streaming Video
Everything You've Been Told About Mobility Is Wrong
Attend this video symposium with Sean Wisdom, Global Director of Mobility Solutions, and learn about how you can harness powerful new products to mobilize your business potential.