In a Tweet (what else?), the Silicon Valley micro-blogging service said it had filed papers with the U.S. Securities and Exchange Commission outlining a proposal to sell shares in the company on the open market. Those looking for details of its planned offering will be disapponted as the documents were submitted “confidentially,” the company said.
Twitter has been valued at between $15 billion and $16 billion, according to Michael Pachter, an analyst with Wedbush Securities, which owns shares in a private market for Twitter. Estimates of Twitter’s total 2013 revenue range from $300 million by Wedbush to $583 million by eMarketer, which also forecast that the company would have $1 billion in advertising revenue in 2014.
Because Twitter’s revenue is less than $1 billion, SEC rules allow the company to file its papers confidentially and preventing the general public from learning more about its true financial performance, at least for now. Twitter is required to eventually make those figures public at least three weeks prior to going on a “road show” to pitch potential institutional and large investors.
How enthusiastically investors will greet Twitter’s IPO will depend on those financial details, rather than the company’s popularity with users — a lesson learned from Groupon, Facebook and Pandora’s IPOs. After an initial burst of excitement over user metrics foundered, those IPOs sank in the weeks following their debut as investor took a hard look at the companies’ finances. Facebook and Pandora took months to rise above their initial offering prices.
Twitter, while counting an impressive 200 million active monthly users, trails its Internet and social media rivals in ad sales. Facebook, for example, reported $5 billion in annual revenue its latest fiscal year ended Dec. 31. Google posted $50.2 billion in revenue the same year, and its subsidiary, YouTube, is on track to garner an estimated $3.6 billion in sales, according to Barclays.
Though Twitter gave no indication of its timing, Pachter of Wedbush expects the company to start trading sometime between Thanksgiving and Christmas. This year so far has been among the slowest for technology IPOs — just 22 tech and Internet listings out of a total of 134 IPOs as of August, according to a count by the Wall Street Journal, down from a peak of 69% of all IPOs in 1999.
Part of the reason for the dearth is a perceived glut in technology stock created by Facebook’s IPO from last year, which flooded Nasdaq with more than 1 billion shares for several months after its May debut as Facebook executives were released from lockup restrictions that prevented them from cashing out until a certain amount of time had lapsed.
Twitter’s relationship with music has had mixed success. The company has successfully persuaded celebrity artists such as Justin Bieber and Katy Perry to use its platform as a core method of connecting with their fans. Seven of the top 10 accounts by number of followers on Twitter as of this week are owned by musicians. Twitter’s recent efforts to carve out a separate application, dubbed #Music, however, has not enjoyed as much traction. After a splashy April debut on the top of the iTunes Apps charts, #Music has all but disappeared from iTunes’ list of top 200 free music apps as of Thursday. The company has since released it as an app on Spotify.