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Twitter learns from Facebook’s IPO follies



Published: Sat, September 14, 2013 @ 12:00 a.m.

By MICHAEL LIEDTKE

AP Technology Writer

SAN FRANCISCO

Twitter is so deeply ingrained in the cultural conversation that its initial public offering is likely to be a hot topic on its trend- setting service for the next few months. Its stock-market debut is likely to be the most scrutinized since Facebook went public in May 2012 and promptly flopped.

Facebook’s follies made an impression. Here are four signs of the Facebook influence on Twitter:

Take the road less traveled

IPO submissions to the Securities and Exchange Commission typically include exhaustive financial information and other sensitive details. By taking advantage of the regulatory changes introduced since Facebook went public, Twitter is giving investors, the media and would-be competitors less time to pore over its IPO documents.

Twitter gained the wiggle room under a law passed last year shortly before Facebook completed its IPO. Called Jumpstart Our Business Startups act, the law allows a company with revenue below $1 billion to file its IPO papers with the SEC confidentially. This allows the documents to remain secret until 21 days before the company starts marketing the deal to investors — known as a “road show.”

By reducing the amount of time that its filing information is available for public review, Twitter is hoping to minimize the nitpicking over its business model. Like other companies that have gone through the standard IPO process, Facebook had to endure more than three months of second-guessing about the information contained in its documents.

Work the numbers

Twitter is going public as a younger and smaller company than Facebook Inc., making it easier for the company to generate the kind of robust growth in revenue that tends to excite investors.

Facebook was 8 years old by the time it went public and had built such a large business that it was more difficult to speed its pace of growth from one quarter to the next. In its final year before going public, Facebook had annual revenue of $3.7 billion — more than twice as much as Google did when it went public in 2004.

In contrast, Twitter is only 7 years old and didn’t even start to generate significant revenue until 2010. Research firm eMarketer estimates that Twitter had $288 million in revenue last year.

Leave some money on the table

Twitter won’t price its IPO as aggressively as Facebook did, says PrivCo analyst Sam Hamadeh. That increases the chances of Twitter’s stock rising once it begins trading. He expects Twitter to set its IPO at a price that values the company at about $15 billion.

Facebook kept raising its IPO price until the company was valued at $104 billion. Facebook saw its stock plunge from its IPO price of $38 to below $18 within four months of its IPO.

Timing is everything

Many analysts thought Twitter might wait until next year to go public, but the stock market’s appetite for social-media companies has never been hotter. With the company’s revenue growth picking up again, Facebook’s stock has surged by more than 60 percent in less than two months.

Things are going so well that even Facebook CEO Mark Zuckerberg has gotten over his one-time aversion to going public.


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