Billion dollar baby: Twitter unveils IPO details
Online giant’s coming out party set to be largest Silicon Valley IPO since Facebook
Twitter announces it IPO filing. The company is seeking to raise $1 billion in the largest Silicon Valley IPO since Facebook’s 2012 listing. Photograph: Hyungwon Kang/Reuters
Twitter, racing toward the largest Silicon Valley IPO since Facebook’s 2012 coming-out party, hopes to woo investors with rip-roaring revenue growth despite having posted big losses over the past three years.
The eight-year-old online messaging service, which last week announced it would double the size of its Dublin office, gave potential investors their first glance at its financials yesterday when it publicly filed its IPO document.
Twitter’s target is to raise $1 billion, a figure devised mainly for registration purposes and that will change as the company embarks on a roadshow to sell its IPO to investors.
Twitter’s debut will be the culmination of its journey from a side-project to a sociocultural phenomenon, one that has become a communications channel for everyone from the Pope to US president Barack Obama. Last month, Iranian president Hassan Rouhani used Twitter to disclose a “historic” phone conversation with the US president.
The service’s emphasis on real-time communication - whether it be about breaking news or chatting with friends about a TV show on air - sets it apart from rivals such as Facebook.
Now, though, the company must prove to Wall Street it can continue to make money, even as growth slows after a period of explosive expansion around the world.
In yesterday’s filing, the first public disclosure of financial figures, Twitter reported that revenue almost tripled to $316.9 million in 2012. In the first half of 2013, it posted revenue of $253.6 million but had a loss of $69.3 million.
The numbers were mostly in line with the estimates of outside analysts. The company began selling advertising in earnest only in 2010, devising a means for ads to appear in the message streams of users that has proven effective for both desktop computers and mobile devices.
The losses are “a non-issue,” said Brian Wieser, analyst at Pivotal Research Group. “It would have been a surprise if they had a profit.”
In the laundry list of risk factors that’s typically appended to all company IPO filings, Twitter warned it was heavily reliant on advertising revenue. It said more than 87 per cent of its revenue came from advertising in the first half of 2013.
The prices Twitter can command for ads has actually fallen over the past five quarters. But the company said that decline was the result of a conscious effort to rapidly expand its available inventory and change its algorithms to distribute ads more frequently throughout each day.
Revenue has risen because the strategy attracted more advertisers, especially small- and medium-sized businesses and international clients, it said.
Still, the company acknowledged the uncertainty of the volatile and highly competitive online advertising market.
“Advertisers will not continue to do business with us, or they will reduce the prices they are willing to pay to advertise with us, if we do not deliver ads in an effective manner, or if they do not believe that their investment in advertising with us will generate a competitive return relative to alternatives, including online, mobile.”
Assuming everything goes smoothly, Twitter could begin trading in November, though it has not revealed which US exchange - the New York Stock Exchange or the Nasdaq - it has chosen.
Wherever it lists, its debut is likely to cause waves across Wall Street and the industry, potentially breathing new life into the market for consumer internet companies and influencing the value of all social media companies.
Some analysts estimate Twitter could be worth as much as $15 billion. That’s a fraction what Facebook was worth at the time of its debut, but Twitter’s profile is just as high.