Technology
The impending IPO of the microblogging phenomenon ignited a competition among Wall Street's biggest names for the prestige of managing its coming-out party.
Updated : Mar 11, 2018, 05:40 AM IST
Twitter Inc has filed for an initial public offering (IPO) with US regulators, the company said on Thursday, taking the first step toward what would be Silicon Valley's most anticipated debut since Facebook Inc's last year.
The company made this announcement through a tweet, that it has submitted papers for the same.
We’ve confidentially submitted an S-1 to the SEC for a planned IPO. This Tweet does not constitute an offer of any securities for sale.
— Twitter (@twitter) September 12, 2013
The impending IPO of the microblogging phenomenon ignited a competition among Wall Street's biggest names for the prestige of managing its coming-out party.
Goldman Sachs is lead underwriter, a source familiar with the matter said on Thursday, which is a major coup for the Wall Street bank. Twitter filed for an IPO confidentially under a 2012 law intended to help emerging corporations with less than $1 billion in revenue go public.
Its debut, though much smaller than Facebook's, could generate tens of millions of dollars in fees from the underwriting mandate itself. Assuming it sells around 10 percent of its shares, or $1 billion, underwriters could stand to divide a fee pool of $40 million to $50 million, assuming an overall fee cut of 4 percent to 5 percent, according to Freeman & Co. But the benefits for banks that underwrite the deal would likely be far-reaching.
"Some companies will say, 'We liked the way you handled Twitter, and we want to come to you first when we do our IPO,'" said David Menlow, president of IPOFinancial.com. "It's not only bragging rights," Menlow said. "It's getting through the front door, which will line up banks for other transactions done after that, like debt financings and M&A."
Technology bankers at major banks from JPMorgan and Credit Suisse Group AG to Morgan Stanley had vied for coveted lead underwriting roles in the IPO. Several have had informal conversations with the micro-blogging network's management, sources familiar with the matter said.
A similar race is on around China's Alibaba, which is expected to raise more than $15 billion this year. Bank chief executives such as JPMorgan's Jamie Dimon and Citigroup Inc's Michael Corbat have made it a point to meet Alibaba founder Jack Ma.
Phenom
Seven-year old Twitter, which allows users to send out streams of 140-character messages, has become an indispensable tool to governments, corporations and celebrities seeking to communicate with their audience, and for individuals seeking both news and entertainment.
Twitter, which has been valued by private investors at more than $10 billion, is on track to post $583 million in revenue in 2013, according to advertising consultancy eMarketer. Max Wolff of Greencrest Capital estimated that Twitter would reach break-even this year, and that it is on track for 40 percent annual growth at a $1 billion annual revenue run rate. "It's completely conquered mobile.
It has an enormous social network. It's becoming a key utility as a second screen to TV and it's literally the first draft of history," Wolff said. "Normally a company like Twitter would have been public for some time."
Twitter is allowed to file its registration statement confidentially due to the Jumpstart Our Business Startups (JOBS) Act, a 2012 law that loosened some of the regulations surrounding the IPO process and other forms of capital raising. Companies that file under that law do not have to reveal certain details until 21 days before embarking on an investor roadshow.
It could allow Twitter to avoid some of the harsh public scrutiny that other tech companies such as Groupon Inc faced. Groupon in 2011 was plagued by questions about its reliance on what some considered to be unusual accounting practices.
Here is how tweeple reacted to the news:
@Twitter #IPO - gotta start making #money to please investors, I suppose. #Wish - no adverts or paid basic features for normal users pls.
— Kevin Chua (@kevtrav) September 13, 2013
I regret not investing in services I love & use frequently (Netflix, Facebook, LinkedIn). I'll probably invest in Twitter after the IPO pop.
— Marty Matheny (@martymatheny) September 13, 2013
Twitter filed for its IPO today. A turning point in social media IPOs?
— Bryan McLaughlin (@B_M_McLaughlin) September 13, 2013
IPO to ruin Twitter as they'll have to find a profit model.
— Grant Brooke (@GrantBrooke) September 13, 2013
Looks like they're finally cashing on this platform MT @twitter We’ve confidentially submitted an S-1 to the SEC for a planned #IPO .
— Randomly London (@RandomlyLondon) September 13, 2013
Twitter to launch IPO. , I want the shares.
— HopelessRomantic (@OhComeOnYaar) September 13, 2013
I heard Twitter announced its intention to IPO on Facebook.
— Paul Walsh (@Paul__Walsh) September 13, 2013
The much anticipated twitter IPO is almost here. Word of caution though to my fellow investor's let the sand settle then make your move
— Samuel Nyarega (@fwittest) September 13, 2013
So Twitter's going public. Nice. #IPO
— Ruby Basara (@RubyDaTashan) September 13, 2013