It was the tweet heard around the financial world: "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" announced @Twitter yesterday afternoon. Less than a minute later the same account followed with "Now get back to work."
Fat chance. Immediately Wall Street twitter-streams were running wild with speculation over what the company would be worth, who the underwriters were, and, less charitably, whether or not Main Street investors would be get fleeced as badly on this IPO as they did on Facebook (FB).
Related: Twitter IPO: The Time is Right
So far details are scarce. Thanks to the Jumpstart Our Business Start-ups Act, the JOBS Act for short, companies with less than $1 billion in revenue can file for IPOs without having to disclose much of anything about their underlying operations until at least 21 days before their so called "roadshow." As a result, Twitter didn't have to reveal anything about revenues, valuation, executive compensation, or even business strategy.
Twitter didn't open its books and let us analyze its business model the way Facebook did, but Facebook's IPO and subsequent performance obviously impacted the timing of Twitter's filing. Until as recently as last summer, early investors in Facebook were well underwater and it was entirely unclear advertising via social media would be a sustainable business model once users transitioned to mobile. Those fears were put to rest on July 24th when Facebook destroyed earnings estimates and revealed that 41% of its advertising revenues were coming from mobile. After that it was only a question of when, not if, Twitter would go public.
Related: Facebook: Buy or Beware
According to the gossip circle that is Wall Street, Twitter is set to record just over $500 million in revenue in 2013, roughly twice what it did last year. The company is said to have around 200 million active Tweeters and has been valued in the private exchange market at somewhere around $10 billion. Those numbers are a fraction of what Facebook has, but in many ways Twitter has a more compelling business model. As Breakout co-host Matt Nesto says in the attached clip, "they dominate the area of breaking news and they dominate the area of 'national snarkism' on big events like the Oscars, Super Bowl, the debates. We love it."
Twitter is already where the country goes to get breaking news in unfiltered form. Right or wrong, by the time news hits television or radio it's already been discussed, parsed, and debated in most people's Twitter feeds. Facebook knows who you went to high school with and whether or not your mom has a new kitty. Twitter knows who you actually pay attention to on a daily basis. The latter is much more valuable.
It's possible that Twitter won't even go public, but it's too late to bottle up the frenzy. All that's left to do now is issue the first of what will be dozens of warnings you'll see in this space over the next few months: Learn from the Facebook IPO. Don't pay any price to be the first on your block to own shares of Twitter.
That having been said it's time to don your giddy pants, the Wall Street IPO circus is coming back to town!
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