Twitter plans public offer to raise $1b

TWITTER Inc has concluded plans for its $1 billion Initial Public Offer (IPO), to expand the company’s ownership base, which has over the years been dominated by nine investors – including five institutions.
Already, the company based in San Francisco, United States (U.S.), has made public its prospectus and pegged the fair value of its stock at $20.62 in August.
On current estimate, there are 620 million shares of the company outstanding, as the prospectus has already removed the veil of secrecy that surrounded the outfit’s financials.
The micro-blogging service, founded in 2006, has evolved from a simple site for 140-character updates to a booming online advertising business that generated $253.6 million revenue in the first half of this year.
With 215 million monthly active users as of February, Twitter wants to begin selling its stock under the ticker “TWTR” and wants to raise $1 billion from outside investors. That monthly figure was up from 200 million in February.
The company generated $317 million in revenue last year, up from $106 million the year before, even though that impressive growth has been undercut by the fact that the company is still losing money, to the tune of $79 million in 2012, down from $128 million lost in 2011.
Twitter realises about 85 per cent of its revenue of advertising, mainly through “promoted tweets” inserted into tweeters streams. The rest comes behind the scenes through data licensing agreements that allow partner companies to search through Twitter data in real time to pick up on emerging social trends.
The company kept its finances hidden from the public for nearly a month using a provision in the Jumpstart Our Business Startups (JOBS) Act for businesses with under $1 billion in revenue.
“The mission we serve as Twitter Inc. is to give everyone the power to create and share ideas and information instantly without barriers,” Twitter wrote in a letter to potential investors. “Our business and revenue will always follow that mission in ways that improve–and do not detract from–a free and global conversation.”
Investors will get three weeks to mull over Twitter’s documents before company executives go on a road tour to talk up the company.
Early reports indicated that Twitter wanted to make its IPO before thanksgiving in order to avoid the type of hype, which gave Facebook a rocky start on the open markets in 2011.
At $12.8 billion, Twitter would be valued at 28.6 times revenue over the past 12 months. Facebook debuted with price-to-sales ratio of about 26, while LinkedIn sold shares for 14.5 times revenue.
The offering will be pivotal for Chief Executive Officer Dick Costolo, who in 2010 became Twitter’s third CEO in as many years. He is credited with bringing management discipline, rapid hiring and a business plan to a company that was bogged down by a lack of focus and frequent technical outages.
Goldman Sachs Group Inc. (GS) was listed as the lead underwriter and was joined by Morgan Stanley, JPMorgan Chase & Co., Bank of America Corp., Deutsche Bank AG, Allen & Co. and Code Advisors. The stock will list under the ticker TWTR.
Twitter’s revenue in the first six months of the year more than doubled to $253.6 million. The company said advertising revenue per timeline view in the second quarter rose 26 per cent from the same period a year ago to 80 cents.
Twitter co-founder Evan Williams is the company’s largest shareholder with a 12 per cent stake. Twitter board director Peter Fenton is No. 2 on the individual list with 6.7 per cent of the company. Williams’ fellow co-founder Jack Dorsey holds a 4.8 per cent stake, but their third partner, Biz Stone, was conspicuously absent from the list of largest shareholders.
Twitter CEO Dick Costolo is No. 4 on the individual stakeholder list at 1.6 per cent. Costolo is already a rich man, taking home $200,000 in salary last year, along with $8.4 million in stock and $2.9 million in stock options. This year, he’ll only make $14,000 in salary, but he’ll likely make a lot more from the IPO.
Five institutional investors have stakes of at least five per cent: Benchmark Capital, DST Global, Rizvi Traverse, Spark Capital and Union Square Ventures.
Companies filing for IPOs, under U.S.’s Securities and Exchange Commission, are required to disclose “risk factors” to potential shareholders. Twitter pointed out its heavy reliance on advertising and the competition in that space from companies with more money and more users: Facebook, Google (GOOG, Fortune 500), LinkedIn (LNKD), Microsoft (MSFT, Fortune 500) and Yahoo (YHOO, Fortune 500). The company also cited its dependency on growing its already large user-base.
Other concerns include Twitter spammers who reduce the quality of the site, possible government censorship of Twitter in some countries, outages on the site, and financial results that “may fluctuate from quarter to quarter.”
During the IPO, it’s common for a company to re-file its paperwork several times over a period of weeks or months. Those updates will add more details on Twitter’s business, and it could even restate some of the financial information detailed in the first filing.
Twitter is, however, yet to disclose whether its stock would be traded on NASDAQ or New York Stock Exchange.