As anticipated, Twitter filed form S-1 with the Securities and
Exchange Commission on Oct 3, 2013 for its Initial Public
Offering (IPO). Although Twitter said that it will trade under
the symbol TWTR, the company did not provide any details
regarding the number of shares it intends to offer, the price
range and also the U.S. exchange it will select for trading.
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Twitter filed the IPO papers with the Securities and Exchange
Commission under a new law passed last year. The law allows
companies with revenues of less than $1.0 billion in its last
fiscal year to keep their IPO documents private, till the last
few weeks (21 days), before a price is set on the stock offering.
Founded in Mar 2006, San Francisco-based Twitter offers a social
short messaging/micro-blogging service, which is currently used
by more than 215 million people worldwide on a monthly basis. The
company processes more than 5 million tweets per day and has 100
million daily active users. Currently, it has approximately 2,000
At the end of the second quarter of 2013, Twitter's average
monthly active users surged 44.0% from the year-ago quarter to
218.3 million. As per Twitter, 75.0% of its average monthly
active users access Twitter from a mobile device. Mobile
advertisement contributes 65% of its revenues.
In the first half of 2013, Twitter earned revenues of $253.6
million, which soared 107.0% from the year-ago period.
Advertising generated 87.0% of revenues during the period.
However, Twitter has reported net loss in the last three years
(fiscal 2010, 2011 and 2012) and also in the first half of 2013.
Goldman Sachs Group (
will be the lead underwriter of the IPO. Twitter targets to raise
at least $1.0 billion from the IPO. As per valuations made by one
of Twitter's investors GSV Capital, the company is currently
worth $10.5 billion, which is significantly lower than
valuation of $100.0 billion at the time of its IPO in 2012.
Analysts believe that Twitter may aim for a valuation of $15.0
billion, at the time of pricing its IPO. This is particularly
based on positive revenue estimates, although the company
continues to report loss.
Market-research firm eMarketer expects Twitter to generate
advertisement revenues of $582.8 million this year. For 2014,
advertisement revenues are expected to grow 63.0% to $950.0
million. Twitter is expected to earn advertisement revenues of
$1.33 billion by 2015.
Twitter introduced its advertisement service only in 2010 and its
revenue growth rate has gained stupendous momentum already. The
company earns by inserting paid ads for a targeted audience,
which resembles normal tweets. The success of this advertising
model prompted Facebook to launch a similar ad product -
Sponsored Stories - in 2012.
Twitter's popularity among the business and social circles for
"breaking news" and its strong position in the mobile platform
(compared to Facebook at the time of its IPO) are key growth
catalysts, in our view.
However, we believe that Twitter will face stiff competition from
more established players such as Facebook,
in the advertisement market (its primary revenue generation tool)
Currently, Facebook has a Zacks Rank #2 (Buy). Goldman Sachs,
LinkedIn and Google carry a Zacks Rank #3 (Hold).