Twitter Files Public IPO Papers, but Red Ink Prevails
The social network reported a net loss of $79 million last year and $69 million in Q1/Q2 2013. But that won't hinder investors who like the business model.Twitter on Oct. 3 filed its public S-1 document to the Securities and Exchange Commission for an initial public stock offering, and it did the deed a few weeks earlier than some analysts had expected. Its chosen identifier for the New York Stock Exchange ticker will be TWTR. The San Francisco-based social network plans to raise about $1 billion in the stock sale, the first day of which likely will take place early next month. The stock price at the IPO opening was estimated by Bloomberg analyst Adam Johnson to be in the $21 range. Here is a link to the public S-1 document.
Thus Twitter, which has been in business since 2006 but has yet to make a profit, made public its prospectus for the first time.
"I didn't expect them to be profitable just yet, but the expenses were clearly there, and it's at a significant level," Blau said. "But also I see that expense as showing how they are investing for their future, meaning they still have to continue to build and push the business forward, and they need to invest internally."
Twitter also is investing internationally, and expansion outside of the U.S./European Union is really a key for success, Blau said.
"Twitter has more serious competition outside of the mature markets where they already have established a solid level of penetration," Blau said. "Growth has seemed to slow down a bit, but it's not something that concerns me today; their growth over time appears robust, and I would expect fluctuations quarter to quarter, but if that slowdown continues over the next quarter or two, then there is real reason for concern."
What does this IPO signify to the social networking market in general?
"The Twitter IPO is really a signal that social networking has come of age," Blau said. "Twitter is the last of the Big 3 social companies to go public (Facebook and LinkedIn are the others), and each has carved out a section of the social marketplace. It's these three social companies that represent the bulk of the brand equity that social enjoys around the world.
"Twitter has a unique place in the social marketplace, one that represents real-time news and information, a global water cooler where people can talk about all manner of current events and happenings in a way that is totally out in the public where anyone can join the conversation," Blau said.