Details Regarding The Twitter IPO

Details regarding the Twitter IPO are not easy to come by since Twitter has not yet officially announced its intentions to go public via an Initial Public Offering (IPO). The following is a summary of what is known about the Twitter IPO at this early date.

Twitter is one of the second generation Internet companies, such as Groupon and Facebook, that emerged in the decade after 2000, and has grown rapidly in recent years. Twitter allows users to maintain a social network with other members of Twitter, which provides users the ability to send out short communications known as tweets (140 characters or less) to followers that are received via the Twitter website. With over 300 million users and over 250 million Tweets being sent per day, Twitter has ample advertising revenue potential. It is no surprise that Wall Street is interested in the potential for a Twitter IPO in 2013.

There is not a great amount of information about the Twitter IPO, but speculation regarding the Twitter IPO has already begun, as the possibility of a Twitter IPO in 2013 becomes more likely. Twitter appears poised to take advantage of the growing interest in Internet IPOs recently. The Twitter IPO should be one of the biggest IPOs on the 2013 IPO calendar. Depending on which other companies decide to go ahead with IPOs in 2013, the Twitter IPO might be the biggest IPO of 2013.

Since the Facebook IPO will dominate the 2012 IPO market, Twitter has good reason to take its time with the Twitter IPO. Waiting until 2013 should be better for Twitter’s IPO selling price and overall publicity, since Twitter will potentially be the biggest IPO of 2013, rather than doing an IPO in the shadow of Facebook during 2012.

While there are no concrete signs, such as regulatory filings, that the Twitter IPO will occur in 2013, recent moves by Twitter management indicate that the company may be seeking to going public via an IPO during 2013. In 2011, Twitter’s Board of Directors initiated a transition in its management team and corporate governance structure that makes it appear as though the company is making moves behind the scenes that are necessary to undergo an IPO and transition to a publicly traded company. Stock market observers point out that the people Twitter hired for their management team in recent years are seasoned professionals who have years of experience working at public companies.

While there is no apparent overriding financial need for Twitter to undertake an IPO in 2013, since the company claims to be financially sound and to not be in need of additional capital to fund current operations and expansion plans (claims that some stock market observers call into question), there are reasons why 2013 might be the time for Twitter to join its Internet peers in the public arena via a Twitter IPO.

The primary reason why Twitter may want to do an IPO in 2013 is to take advantage of the new wave of interest in Internet IPOs, which is rivaling the legendary wave of Internet IPOs that occurred during the late 1990s. Groupon and LinkedIn completed successful IPOs during 2011, and Internet titan Facebook is set to do a blockbuster IPO during 2012. It is likely that Twitter will want to roll out the Twitter IPO before the recent interest in Internet IPOs fades. If they wait until after 2013 to do their IPO, Twitter may miss the current Internet IPO craze, and miss out on getting the highest price for the shares that they sell to the public, reducing the amount of capital they can raise.

Another reason why Twitter may be heading for an IPO in 2013 is because the United States Security and Exchange Commission (SEC) requires private companies with more than 500 private shareholders to disclose financial information as if they are a public company. Purchases of private Twitter stock on private stock trading sites, such as SecondMarket, and company sales of private Twitter stock to private investors could lead Twitter to reach the 500 private investor threshold that triggers public disclosure. Reaching the public disclosure threshold normally causes private companies, such as Twitter, to quickly accelerate their IPO plans, since private companies generally prefer to reap the benefits of being a public company after they must disclose financial information as if they are a public company.

A company called eMarketer analyzed Twitter’s finances and estimated that Twitter booked $139.5 million in revenues in 2011, and projects that Twitter will increase revenues to $540 million in 2014. Twitter potentially tripling revenues in three years sounds impressive, but such revenue gains are not terribly impressive compared to the revenue and growth rates of their Internet rivals. Twitter’s main source of revenues is advertising, which they have tepidly embraced. There certainly appears to be room for current or future Twitter management to increase advertising revenues.

Twitter’s relatively unimpressive revenue and revenue growth rate could actually be another factor that prods Twitter to go public via an IPO in 2013. Without being able to rely upon rapidly growing revenue to fund operations, Twitter may need to tap the public equity markets for funds.

With the Twitter IPO still a long way off, it is too early to speculate about what price the Twitter IPO might command and what the Twitter’s valuation may be upon completion of their IPO. The success or lack of success of the Facebook IPO in 2012 will likely affect Twitter’s decision regarding going forward with an IPO in 2013, as will overall stock market conditions. The iron is once again red hot for Internet IPOs. If Twitter waits too long to sell shares to a public hungry for Internet company shares, they may miss out on a chance to capitalize on the second wave of Internet IPOs.