Twitter’s market debut will be the most anticipated initial public offering since Facebook listed last year, and the microblogging service is making sure to avoid some of its rival’s pitfalls.
Twitter disclosed it had filed to go public in one of its 140-character postings Thursday, giving no other financial figures or details on when it would actually list.
The San Francisco-based company filed confidentially with the Securities and Exchange Commission through a process that will keep sales and profit data under wraps until shortly before a road show to market to investors. Twitter may be seeking to avoid the hype that led to Facebook pricing its offering at 107 times trailing 12-month earnings, more expensive than 99 percent of all companies in the Standard & Poor’s 500 Index at the time. Facebook lost half its value following the $16 billion IPO.
“Twitter will do everything it can to avoid anything that looks like the Facebook IPO,” said David Pakman in New York, a partner at Venrock Inc., an early-stage venture capital firm. The confidential filing should help keep expectations down a bit, he said, adding that he hoped Twitter would “use a different pricing strategy than Facebook.”
Goldman Sachs will be the lead underwriter for the IPO, sources said. The investment bank’s top rival, Morgan Stanley, led Facebook’s public debut.
Twitter’s filing used the Jumpstart Our Business Startups Act, which lets companies that qualify as emerging-growth companies submit filings for confidential review. Jim Prosser, a spokesman for Twitter, declined to comment on the company’s IPO strategy.
The microblogging service was valued last month at $10.5 billion by GSV Capital Corp., one of its investors, up 5 percent from a May estimate. Facebook, whose shares reached a record this week after recovering from a decline of as much as 53 percent last year, is valued around $109 billion.
Facebook, after increasing the price and number of shares, went public in May 2012 in the biggest IPO for a technology company. The stock slipped below its IPO price on the second day of trading and began sliding. Investors were concerned that the operator of the world’s biggest social-networking service would struggle to profit from its growing base of mobile users. Facebook did not roll out an advertising service for wireless devices until the IPO process started.
The stock began climbing from its lows in September 2012, and it wasn’t until July of this year that Facebook put many of those concerns to rest when it announced revenue from mobile made up more than 40 percent of advertising dollars in the second quarter. The stock topped the IPO price of $38 in August and earlier this month surpassed its all-time high.
Twitter, which started in 2006 and didn’t introduce advertising until 2010, is at an earlier stage of growth than Facebook was at its public debut. Facebook had almost $4 billion in revenue the year before its IPO. Twitter is hoping sales reach $1 billion in 2014. That means the company has a better shot at showing robust growth after it goes public.
“Twitter is probably coming to market with a different phase of its growth cycle than Facebook did,” Pakman said. “I think its strategy of when to go public is more about where the company is in the maturity of its core business model, and what kind of growth it sees ahead of it.”
Twitter will increase advertising revenue 63 percent, from $582.8 million this year to $950 million in 2014, EMarketer Inc. estimates. And that’s up from just $139.5 million in 2011, according to the research firm.
The microblogging service also has a strong mobile story. Advertising tied to wireless devices should make up more than half of revenue this year, according to EMarketer.
“Twitter is establishing itself as a leader with a growing strength in pure-play mobile advertising,” Brian Wieser, an analyst at Pivotal Research Group, wrote in a research note.
Twitter is already attracting investor interest. The company will be a welcome option for those seeking to diversify from the two other big social-media sites, Facebook and LinkedIn Corp.
“This is the one main company that was missing,” said Bruno del Ama, CEO at Global X Funds. “Having a company like Twitter as a potential investment in our fund is very exciting for us.”