Twitter IPO Filing Arrives: Up to $1 Billion in Stock

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The long-awaited S-1 filing from Twitter Inc. has now been filed with the Securities and Exchange Commission. No formal terms have been set, but the company is filing to sell up to $1 billion worth of its common stock. We have seen now that the stock ticker is being proposed as TWTR, but it does not yet specify whether this will be listed on the New York Stock Exchange or on the Nasdaq.

Twitter’s IPO syndicate is rather large. It includes Goldman Sachs, Morgan Stanley, J.P. Morgan, Bank of America Merrill Lynch, Deutsche Bank Securities, Allen & Company and a firm called CODE Advisors. Here are some bragging terms: Twitter claims more than 200 million active monthly users. It also claims more than 500 million tweets per day.

Do we need to tell you what Twitter does? No. Its tweets are limited to 140 characters and the formal numbers are as follows: more than 215 million monthly active users, over 100 million daily active users, with the total users creating approximately 500 million tweets each day.

Twitter’s filing says:

Tweets have appeared on over one million third-party websites, and in the second quarter of 2013 there were approximately 30 billion online impressions of Tweets off of our properties.

This comment should stand out handily:

Mobile has become the primary driver of our business. … In the three months ended June 30, 2013, 75% of our average monthly average users accessed Twitter from a mobile device … and over 65% of our advertising revenue was generated from mobile devices. We expect that the proportion of active users on, and advertising revenue generated from, mobile devices, will continue to grow in the near term.

From 2011 to 2012, revenue increased by 198% to $316.9 million, and the net loss decreased by 38% to $79.4 million. Adjusted EBITDA in that time rose 149% to $21.2 million. From the first six months of 2012 to the first six months of 2013, revenue increased by some 107% to $253.6 million. Unfortunately, its net loss increased by 41% to $69.3 million, even though the adjusted EBITDA rose by $20.7 million to $21.4 million.

We want you to look closely under the “Risks Associated with Our Business” and see that there is one risk that is not brought up until later. What happens when the media and Google turn on Twitter for effectively being one more demonetization tool for their content (which actually pays their bills)? The RISK FACTORS does say:

We compete against many companies to attract and engage users, including companies which have greater financial resources and substantially larger user bases, such as Facebook (including Instagram), Google, LinkedIn, Microsoft and Yahoo!, which offer a variety of Internet and mobile device-based products, services and content. For example, Facebook operates a social networking site with significantly more users than Twitter and has been introducing features similar to those of Twitter. In addition, Google may use its strong position in one or more markets to gain a competitive advantage over us in areas in which we operate, including by integrating competing features into products or services they control. As a result, our competitors may acquire and engage users at the expense of the growth or engagement of our user base, which would negatively affect our business. We also compete against smaller companies, such as Sina Weibo, LINE and Kakao, each of which is based in Asia.

Individual ownership is listed as Evan Williams at 12%, Peter Fenton at 6.7%, Jack Dorsey at 4.9% and Richard Costolo at 1.6%. Then the 5% stockholders from venture groups are listed as entities affiliated with groups as follows: Rizvi Traverse, Spark Capital, Benchmark Capital Partners, Union Square Ventures and also DST Global.

The filing also said:

Assuming the conversion of all outstanding shares of our Class A junior preferred stock and our convertible preferred stock into shares of our common stock, which will occur immediately prior to the completion of this offering, as of June 30, 2013, there were 472,613,753 shares of our common stock outstanding, held by 704 stockholders of record, and no shares of our preferred stock outstanding.

Since our inception, we have incurred significant operating losses, and, as of June 30, 2013, we had an accumulated deficit of $418.6 million.


We noted earlier (4:14 p.m. EST):

Word has been out that Twitter will file its S-1 with the Securities and Exchange Commission before the end of the week. We are now expecting this A-1 filing to drop as soon as late in the afternoon on Thursday.

See page 2 for a full summary of additional risk factors.