What we learned about Twitter from its IPO filing

Twitter hasn't turned a profit, gets more than half its revenue from mobile ads, and averaged 218 million active users each month in the second quarter, the social networking firm revealed Thursday. Still unknown heading into its IPO: What's a share worth?

Kacper Pempel/ Reuters/ File
Shadows of people holding mobile phones are cast onto a backdrop projected with the Twitter logo in Warsaw. The 8-year-old online messaging service gave potential investors a first glimpse at its financials on Thursday, when it made public documents pertaining to its upcoming initial public offering.

It’s the most important social media initial public offering since Facebook entered the market – rather ungracefully – in mid-2012: Twitter stocks are going public.

On Thursday, Twitter filed an S-1 form with the federal Securities and Exchange Commission (SEC), giving potential investors a first look at the company’s finances.

Ahead of IPOs, companies are required to make their financials public about three weeks before the start of “road shows,” which they use to try to woo potential investors. Twitter’s SEC filing signals that the company will likely begin its road show in late October, and that shares will debut in November, according to USA Today.

The social media site began about seven years ago as a way for users to reach, quickly and anywhere, a wider audience than they could on other sites such as Facebook. Its hallmark is the concise 140-character blurb, or tweet.

While Twitter is not as ubiquitous as social media behemoth Facebook, its 140-character format has carved out a niche of its own, offering individuals a way to communicate directly with others, including public figures ranging from Pope Francis to Amanda Bynes via tweets.

Twitter undoubtedly has social currency, with a monthly average of 218 million active users in the second quarter, up 44 percent from the same period a year ago, according to the company's SEC report. But it remains to be seen if Wall Street will buy into its star power: Potential investors worry that interest in a social media venture has the potential to wane over time, and the company's prospectus shows that the growth rate of new users has lately slowed and that Twitter has not yet turned a profit. 

This leaves Twitter with two options: either keep expanding its user base, or increase its monetization, Santosh Rao, an analyst at Greencrest Capital, told USA Today.

As Twitter prepares for its IPO, investor and analyst comparisons to Facebook, which went public in 2012, are inevitable. Many have already noted that Twitter is much more aligned with the industry's shift to mobile devices than was Facebook at the time of its IPO. One new piece of information: 65 percent of Twitter's ad revenue in the second quarter in 2013 came from mobile devices. 

Michael Pachter, an analyst at Wedbush Securities, said Twitter may have generated a buzz in September with its announcement of a move toward an IPO, but potential investors are likely to find it harder to understand than Facebook was. (Details of the documents remained private because Twitter’s annual revenue is less than $1 billion, according to Reuters.)

“It’s not well understood by Wall Street,” Mr. Pachter told USA Today. “I bet 80 percent of institutional investors probably had not used Twitter before the company said it had filed for an IPO confidentially last month. Whereas 80 percent of institution investors had probably used Facebook before its IPO last year.”

Twitter has not yet set a price for an initial IPO.

You've read  of  free articles. Subscribe to continue.
Real news can be honest, hopeful, credible, constructive.
What is the Monitor difference? Tackling the tough headlines – with humanity. Listening to sources – with respect. Seeing the story that others are missing by reporting what so often gets overlooked: the values that connect us. That’s Monitor reporting – news that changes how you see the world.

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to CSMonitor.com.

QR Code to What we learned about Twitter from its IPO filing
Read this article in
QR Code to Subscription page
Start your subscription today