Twitter sets listing plan in motion with surprise tweet

Goldman Sachs will be the lead underwriter for the most highly anticipated initial public offering of a social media firm since Facebook

PUBLISHED : Friday, 13 September, 2013, 2:26pm
UPDATED : Saturday, 14 September, 2013, 4:24am

Twitter, the microblogging service with more than 200 million members worldwide, has filed to go public, moving closer to the most anticipated offering since Facebook.

Goldman Sachs will be the lead underwriter for the initial public offering, according to people with knowledge of the matter who asked not to be identified because the information was not public.

Twitter disclosed on Thursday it had filed to go public in one of its 140-character messages, known as a "tweets", but did not say when it might complete its market debut, or how much it planned to raise.

A public listing marks a watershed moment in Twitter's journey from its 2006 beginnings as a way for web users to publish short messages, to a megaphone for hundreds of millions of members worldwide to join conversations on global affairs, sports and entertainment.

Chief executive Dick Costolo will need to convince investors that the offering will fare better than internet IPOs from Facebook, Groupon, and Zynga, which all lost more than half their value within six months of their listings.

While the San Francisco-based company is set to be one of the largest internet offerings since Facebook, Twitter is still a fraction of the size of the world's biggest social-networking service. Twitter was valued last month at about US$10.5 billion by GSV Capital, one of its investors, up 5 per cent from a May estimate.

Facebook, which raised US$16 billion in May 2012 in the biggest IPO for a technology company, has a market value of about US$109 billion.

"This is obviously one of the seminal IPOs that the industry has been waiting for," said Byron Deeter, a partner at Bessemer Venture Partners.

Twitter did not give insight into its financials because the company filed confidentially with the United States Securities and Exchange Commission under the Jumpstart Our Business Startups, or Jobs, Act. Under the rule, companies with less than US$1 billion in annual revenue can submit IPO filings without making their S-1 prospectus public until shortly before the sale.

"We've confidentially submitted an S-1 to the SEC for a planned IPO," the company said in its tweet. "This Tweet does not constitute an offer of any securities for sale."

Twitter is recognised as one of the major social media companies that is well-positioned in the fast-growing mobile arena, since consumers increasingly access the service on their smartphones and tablets. It has also rapidly expanded revenue after introducing an advertising model in 2010, giving marketers new ways to reach its growing user base.

Twitter now lets marketers pay to give their tweets prominent placement on timelines, where people get updates from the accounts they follow.

Twitter will increase advertising revenue 63 per cent to US$950 million in 2014 from US$582.8 million this year, according to estimates by research firm EMarketer. That is up from US$139.5 million in 2011. Advertising tied to wireless devices should make up more than half of revenue this year.

Revenue is rising as Twitter has become a cultural touchstone, used by celebrities, politicians and businesses to interact with the public.

This is obviously one of the seminal IPOs the industry has been waiting for

According to which collects data from Twitter, Justin Bieber is the most popular member with 44.4 million followers. Katy Perry is second with 42.6 million, followed by Lady Gaga with 40.1 million.

Among businesses, Google's YouTube has the most followers with 33.4 million.

Twitter's ubiquity is a far cry from its early history when the service was borne out of a failing startup from co-founder Evan Williams called Odeo. Other co-founders include Biz Stone and Jack Dorsey.

The company's leadership was initially marked by management changes. Dorsey was chief executive before Williams took the role over. When Williams and Stone stepped back from the company, Costolo became chief in 2010 after earlier joining as chief operating officer. Dorsey, who also runs mobile-payments company Square, remains Twitter's chairman.

Twitter's investors include venture-capital firms Benchmark, Union Square and Spark Capital. In January the company was valued at about US$9 billion when a fund managed by BlackRock bought stock from employees, a US$1 billion increase from a 2011 investment round led by DST Global.