Twitter IPO Comes As Sales Soar, Loss Swells

Investor's Business Daily

Twitter late Thursday filed for a roughly $1 billion initial public offering, revealing revenue on track to double this year with strong mobile ads, but persistent losses.

The short-messaging service said 65% of its advertising revenue came via mobile ads in Q2.

San Francisco-based Twitter on Sept. 12 "confidentially" filed with the Securities and Exchange Commission. It refiled publicly Thursday, offering new financial details for what promises to be one of this year's most-watched technology offerings.

Twitter logged $253.6 million in sales for the first six months of 2013, up 107% from $122.4 million in the year-earlier period.

Revenue nearly tripled to $316.9 million in 2012 from $106.3 million in 2011.

Twitter lost $69.3 million in the first half of the year vs. $79.4 million during all of 2012.

"Since our inception, we have incurred significant operating losses," the company said, citing an accumulated deficit of $418.6 million. It has about $165 million in cash or equivalents.

Twitter had 218 million active monthly users during Q2, up 44%. More than 100 million log in each day. Users are posting about 500 million daily messages. It's developed several revenue streams, including "sponsored" tweets, to monetize traffic.

Like rival social network Facebook (FB), Twitter is attempting to capitalize on robust mobile use by building advertising technology that targets handsets. Research spending at Twitter more than doubled to $111.8 million in the first half of the year.

Most Twitter revenue comes via ads, which are displayed within a stream of followed tweets. About 75% of monthly users log in on mobile devices.

Twitter should benefit from Facebook's IPO folly, says Francis Gaskins, who tracks offerings at IPO Desktop. Facebook in its May 2012 initial offering priced at 38, but the stock dropped off quickly. Facebook stock has since rebounded, which lends Twitter some needed credibility, Gaskins says.

Twitter's strong mobile performance also could sway some investors, Wedge Partners analyst Martin Pyykkonen said in a recent interview.

"It should really benefit Twitter that they're coming out at a time when mobile adoption, broadly speaking, is seen by advertisers as better," Pyykkonen said.

Under a provision in 2012's Jumpstart Our Business Startups, or JOBS, Act, companies can file an initial S-1 confidentially if they meet guidelines for "emerging growth" companies. They must have GAAP revenue of less than $1 billion during their latest fiscal year.

A company filing confidentially must disclose financial results 21 days before a public offering or a road show, when executives travel the country to woo institutional investors. The lead underwriter for the IPO is Goldman Sachs, with support from Deutsche Bank, Morgan Stanley, Bank of America and JPMorgan. The company plans to list under the symbol "TWTR," although it didn't say which exchange it will trade on.

Twitter expects to have about 472.6 million shares outstanding following the offer. It incorporated in Delaware in 2007 and has some 2,000 employees.

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