Twitter Goes Public: What’s Next?

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03 October 2013

Twitter has prepared its IPO and will make a full presentation soon. The popular microblogging site may or may not finalize its plans before the American Thanksgiving hoiday in November.


What Has Already Been Done?

Twitter started work on its IPO on September 12 when the company presented Form S-1 to the Securities and Exchange Commission. This is the usual first step in planning an IPO for American companies. Form S-1 includes financial results for all previous periods, business structure details, risk factors connected with investments, and other items. Once the form is submitted, regulatory authorities provide feedback. According to financial data, Twitter had annual earnings amounting to some $1B USD.

What Is Yet to Be Done?

The IPO will bring the announcement of the “real cost” of Twitter. At present, the company’s share amount to anywhere from 28 to 30 dollars USD and Twitter itself from $15B to $16B USD. The main focus of the IPO will be the company’s balance sheet and everything related to that information. Here are the three most important sections:

Random Consolidated Financial Data.

In this section, Twitter will calculate how much was earned and spent, and if there is any “clean” profit. According to the rules, the company must account for the last five financial years. As Twitter is an Internet service, apparently such information will be presented in terms of “user activity per month” and “users activity per day.” Average revenue per user will need to be defined.

Risk Factors

This part is perhaps the most interesting part of the IPO. Most of the risks cited in such reports are clichés common for any company, but there will be also risks specific only to Twitter. To refresh our memories, let’s remember that when Facebook presented its IPO, the “risk factors” were noted as “quick mobile device conversion will entail advertising-related losses”—a line that frightened investors. But this will perhaps not be as big of a problem for Twitter.

Commerce and Main Shareholder

An IPO promises to tell us who the eventual owner/CEO of Twitter is. This information is already known to us: cofounder Evan Williams is the major shareholder with 15% equity in the company. In Form S-1, the company must also reveal the names of investors who own more than 5% of the company, and also the names of the members of the board, and of the company’s top management.

What Happens Now?

Twitter will present Form S-1 and give 21 days to investors, journalists and spectators to judge all given information. In all likelihood, after the first release of information, actual hard data, like share prices and regulations will then be made public.

The larger question is about what Twitter is planning: Long-term prospects or simply a change of shareholders? And will the changes have a positive effect on the company? Twitter has already made a number of high-profile acquisitions in recent months, including discovery engine Spindle, analytics service Trendrr, and mobile user acquisition specialist MoPub—all acquisitions that suggest ambitious plans for the social media giant in the future, on web, on mobile, and even on television. It’ll be interesting indeed to see where the company heads from here.