Twitter made the surprise announcement that it planned to sell stock to the public as only Twitter could: in less than 140 characters.
It revealed Thursday that it had filed the initial paperwork for a public offering in a tweet. A second tweet said simply, “Now back to work,” and showed a picture of Twitter’s San Francisco offices.
Those were the only public comments from the 7-year-old company about to mount the most hotly anticipated IPO since Facebook Inc. It marked the first step in a calculated effort to make its public debut more “low key” than Facebook’s, which was botched by runaway hype and pent-up demand for a social media IPO.
Equally unconventional was the manner in which Twitter submitted its paperwork. Potential investors will not get a glimpse of the company’s finances — at least not right away.
Twitter filed its preliminary prospectus with the Securities and Exchange Commission, known as an S-1, confidentially.
That means it does not have to release detailed financial information — including its revenue and income — until three weeks before it embarks on its “road show” for investors.
The stealth filing was made possible by a law signed by President Obama last year, the Jumpstart Our Business Startups, or JOBS Act, that enables companies with less than $1 billion in revenue to file confidential IPOs.
Analysts say these “secret IPOs” are a game changer for young technology companies like Twitter, giving them a chance to go public with less paperwork and fewer financial disclosures to the media and competitors.
But the confidential filing also makes it far tougher for analysts and investors to get a sense of how many shares Twitter would sell or how the shares would be priced.
How much money the company makes is a closely guarded secret. Research firm EMarketer estimates that Twitter will generate $583 million in advertising sales this year. It’s not forecast to cross the $1-billion threshold until 2015, when EMarketer expects Twitter to rake in $1.3 billion in ad revenue.
According to reports, the company became profitable in December and is on track to generate $650 million in revenue this year.
That’s a far cry from Google Inc. and Facebook, its chief rivals competing for the attention of the world’s biggest advertisers.
Twitter is rewriting the playbook of technology IPOs, said Max Wolff, chief economist and senior equity analyst at Greencrest Capital Management in New York.
A Twitter IPO could provide a huge boost to Wall Street investment banks — particularly lead underwriter Goldman Sachs — searching for a hot stock to excite investors. The prize: huge fees and bragging rights. Twitter was valued in its last funding round around at about $10 billion, and its public debut could trigger a boom in tech IPOs.
“If Twitter has a successful run — and I think there’s every reason to expect this to be successful in a way that Facebook wasn’t — you can expect a deluge,” Wolff said.
Twitter met with investment banks in recent weeks to capitalize on what analysts said was a golden moment for social media on Wall Street.
Facebook shares this week hit an all-time high, climbing above the $45 mark, the price that its shares reached on its first day of trading in May 2012. Investors have also pushed up the value of professional social networking service LinkedIn.
A successful IPO by one of the Internet’s best-known brands could power the stock market higher, analysts said.
“Internet stocks are valued at crazy levels right now, so the timing is perfect,” Wedbush Securities analyst Michael Pachter said.
California officials are also counting on the IPO to help pad the state’s coffers. Technology IPOs have already added hundreds of millions of dollars from capital gains taxes.
Courtesy of Los Angeles Times