Twitter’s IPO filing this week prompted two reactions: “Wow!” and “Why now?”
True, many believed the San Francisco micro-blogging site was on a path to an initial public offering. But most pundits hadn’t expected it to happen until 2014. Sitting on hundreds of millions of dollars in venture capital, Twitter’s leaders repeatedly have insisted they’re not focused on going public.
But with Wall Street fully recovered from the IPO lull that followed last year’s botched Facebook debut, Silicon Valley’s most anticipated stock offering since — well, since Facebook’s — is officially in the pipeline.
“Why go public now? I’d say because it can,” said Bill Tai, a venture capitalist with Charles River Ventures. His firm was one of the first investors in Twitter.
The number of nationwide IPO filings through August was up by more than 50 percent from last year, according to research firm Renaissance Capital. Wedbush Securities analyst Michael Pachter noted that Internet stocks such as LinkedIn and Pandora have seen their share prices soar in recent months.
Answers about the timing — or anything else — weren’t forthcoming from Twitter.
Not only is the company now under “quiet period” rules imposed by the Securities and Exchange Commission, but it chose to file under new SEC rules that permit many details to remain secret for now.
The company used its own Twitter account Thursday to announce it had filed. A spokesman declined to comment on such details as how much money the company hopes to raise from investors or when the stock offering might take place.
But the fact that Twitter is using a confidential filing hints at one detail about its finances: The new SEC rules that permit such filings limit them to companies with less than $1 billion in annual revenue.
That’s why Karsten Weide, who tracks online media for the IDC research firm, was among those surprised by the announcement. It shows, he said, that “their ad business is growing quickly, but it’s still very small.”
Twitter was founded in 2006 by young techies Jack Dorsey, Ev Williams and Biz Stone. It has surpassed 200 million monthly users, who share their thoughts in bursts of 140 characters or less. (Twitter’s own announcement of the SEC filing weighed in at a svelte 135.)Speculation about a Twitter IPO died down after Facebook’s rough Wall Street debut, which saw its share price sink from $38 to less than $20 in the first year. Facebook has rebounded, however, pushing to a high of more than $45 Wednesday after its most recent earnings report showed strong revenue gains.
“If Facebook had hit an all-time low, you can bet they (Twitter) wouldn’t be coming out now,” said Tai.
The warm market conditions notwithstanding, recent hires indicate Twitter’s IPO plans have been in the works awhile. Last month, it added the former CEO of Ticketmaster to spearhead new e-commerce efforts. It also reportedly hired a stock administration analyst who worked on Zynga’s 2011 IPO.
Bloomberg News, citing an unidentified source, reported that Goldman Sachs would be the lead underwriter for the Twitter offering. Some observers said that would be a slap at rival investment bank Morgan Stanley, which led Facebook’s IPO but was criticized for missteps.
“Twitter will learn from Facebook’s flawed playbook,” said Sam Hamadeh, CEO of financial analysis firm PrivCo.