Social media phenom Twitter last week released more details of its long-awaited initial public offering, unveiling plans to raise as much as $1 billion to help cement its place in the television and mobile landscapes.
Twitter first revealed plans to go public last month, announcing via a tweet that it had made private filings with the Securities and Exchange Commission, an initial step toward a full-fl edged IPO. The advantage to a so-called confidential IPO is it lets smaller companies file the necessary paperwork to start the IPO wheels turning without having to immediately make their financial statements public. That can wait until the companies are closer to conducting a road show to pitch the offering to potential investors.
Analysts have valued Twitter as high as $10 billion.
A more detailed filing made on Oct. 3 contained few surprises — Twitter’s revenue nearly tripled from $106.3 million in 2011 to $316.9 million in 2012 and is on pace to grow by another 60% in 2013, with the company reporting $253.6 million in sales in the first half of this year. At the same time Twitter is hurtling toward profitability, reporting its first year of positive cash flow in 2012 — $21.2 million. In the first half of this year, EBITDA has grown to $21.4 million.
In a research note last week, Pivotal Research Group senior analyst Brian Wieser wrote that while Twitter continues to lose money — net losses totaled $79.4 million in 2012 and $69.3 million in the first half of 2013 — that’s normal for a tech company still in its early stages. Wieser noted that Facebook, at the same point in its history, had less revenue and heavier net losses than Twitter. “Additional scale will undoubtedly drive the company into the black, even as other cost pressures emerge,” he added.
Once derided because of doubts that it could build a business model on the 140-character ramblings of its users, Twitter has proven to be a force in advertising and is gaining a foothold in the television market via a recent deal with ratings-measurement giant Nielsen and an agreement to acquire social-TV measurement firm Trendrr. In the IPO, the company noted it has grown monthly active users (MAUs) from 138 million in March 2012 to 218 million by June 30 this year. Since its inception in 2007, users have issued more than 300 billion tweets.
Twitter believes it has only scratched the surface. It noted in the prospectus that it still has a significant opportunity to expand its base — among the world’s 2.4 billion Internet users and 1.2 billion smartphone users, only 215 million are MAUs of Twitter.
Some of the proceeds from the IPO will be used to address growing that base through geographic expansion, additional mobile applications, product development and establishing platform partners, according to the Oct. 3 filing.
The company has been in a race for dominance of the second screen with rival Facebook and has created campaigns around big TV events like the NBA Finals, the NCAA Men’s Basketball Tournament, the Super Bowl (more than 24 million tweets were sent during last year’s contest alone) and shows like ABC’s Scandal. Twitter said in the prospectus that it is looking to expand its presence in the television arena. “We plan to continue to leverage our media relationships to drive more content distribution on our platform and create more value for our users and advertisers,” the company said.
Twitter hasn’t set a date for its IPO yet; that should come in subsequent filings. The company did not specify which exchange it will trade on, but has picked “TWTR” as its ticker symbol. Goldman Sachs is the lead underwriter for the offering, followed by Morgan Stanley and J.P Morgan.
A new SEC filing on Twitter’s planned IPO had few surprises, but affirmed the company, valued by analysts as high as $10 billion, intends to expand its presence in the TV arena.