Twitter IPO Paves Way for Stock Market Debut
Microblogging service Twitter has ended years of speculation over whether it plans to launch on the stock market, by filing in private for an initial public offering (IPO). It is likely to be the most-highly anticipated since Facebook’s IPO in May 2012.
In keeping with Twitter’s service, the plans were revealed via a 140-character tweet on the company’s own account. Although very little detail on the planned IPO was revealed, reports suggest that Goldman Sachs has been selected as the lead underwriter. Twitter did not reveal when it plans to hold the offering, nor the amount that it aims to raise.
Twitter has been able to maintain the privacy of it financials as the company filed confidentially with the US Securities and Exchange Commission (SEC) through the Jumpstart Our Business Startups (Jobs) Act. The act permits companies with annual revenues of less than US$1bn to submit IPO filings without making their S-1 prospectus public until shortly before the sale. However, the act, which was passed in 2012, requires US companies to go public once the number of its private investors exceeds 2,000.
The filing is keenly anticipated, as it should also shed light on how Twitter intends to generate significant revenue. The company claims 200m users worldwide who send over 400m tweets daily; of which nearly 60% are via mobile devices such as smartphones. However, chief executive officer (CEO), Dick Costolo, recently said that he objected to “short-term thinking” about revenues, which are widely believed to be less than US$1bn. This would enable it to file secretly, as filing publicly is only required of biiger companies with revenues exceeding US$1bn.
Twitter was valued last month at about US$10.5bn by its investor GSV Capital Corp, a 5% increase from a May estimate. By contrast Facebook, which last year raised US$16bn in the biggest IPO for a technology company, has an estimated market value of US$109bn.