Twitter Reveals $1 Billion IPO Plan
Twitter Inc. on Thursday revealed plans to raise up to $1 billion in a public offering, looking to cash in on a messaging service that has transformed public conversation but is still losing money and facing challenges attracting new users and advertisers.
Twitter's Annotated S-1
Read the full document filed with the Securities and Exchange Commission with key sections highlighted.
Potential buyers for the first time saw the financials behind one of the most anticipated stock-market debuts of the year, which showed the social network's revenue more than doubled to $254 million in the first six months of this year.
But its net loss grew by 40% to $69 million as the company's expenses ballooned. Twitter's user growth is also slowing, and prices for advertisements, which make up the bulk of the company's revenue, are falling.
"They certainly have a lot of work ahead of them to get mainstream America to understand" how Twitter works, said Brian Solis, an analyst at the Altimeter Group.
Twitter had previously shielded the figures by filing its initial IPO documents confidentially in July, under a new federal law.
The amount raised in the filing is an estimate that could change when Twitter launches its investor "roadshow," where it will formally pitch its stock to investors.
The document suggests Twitter recently valued itself at about $9.7 billion, based on the number of shares outstanding, or at about $13 billion when including equity awards.
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In seven years, Twitter has grown from a wobbly startup to a social phenomenon where in just 140 characters its 215 million monthly active users tap out more than 500 million messages each day.
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The short-message service serves as a global forum in which users break news, organize protests and gripe about what they ate for lunch. As early as 2008, Twitter turned eyewitnesses into "citizen journalists" who reported on a terrorist attack in Mumbai.
Now, once-elusive public figures including the pope, Warren Buffett and Kanye West "tweet" their thoughts and interact with other users. Twitter CEO Dick Costolo uses the service to answer users' troubleshooting queries. Businesses, stock pickers and politicians alike analyze the sentiments expressed on Twitter as important indicators.
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When Facebook filed for a public offering, the company revealed sales of $3.7 billion and a profit of $1 billion for 2011. It also had 845 million monthly active users, a huge bragging point as it pitched itself to investors.
Twitter's growth is also a question. The majority of Twitter's revenue, about 75%, is from the U.S., even though three-quarters of monthly users are outside the U.S. Facebook also has a wide gap between its usage and its ad revenue outside the U.S., where advertising businesses typically are less mature.
In the second quarter, Twitter's growth in monthly active users slowed to 7% from three months earlier, compared with 10% to 11% growth in the prior three quarters.
Like Facebook, Twitter makes money mostly by selling advertising based on users' posts. As they compete for advertisers, both companies position themselves as the world's online town square.
Twitter also has as a second business licensing its data companies that analyze user tweets for insights on news events and social trends. That business generated $47.5 million in revenue last year, roughly 15% of the total.
Morgan Stanley had led Facebook's IPO, and was criticized after Facebook shares fell as much as 50% in their first three months of trading, though the stock has since recovered and is well above its initial price.
J.P. Morgan Chase JPM -0.29% & Co. also is in the lead group of banks, meaning that the same three banks that led Facebook's IPO will lead Twitter's. Bank of America Merrill Lynch and Deutsche Bank AG DBK.XE +0.48% are also serving as underwriters.
The largest Twitter shareholder specified in the filing is co-founder Evan Williams, who owns 12% before the offering. He became Twitter's CEO in 2008 before being replaced by Mr. Costolo in 2010. At Twitter's most-recent internal valuation, Mr. Williams' stake would be valued at nearly $1.2 billion.
Other major shareholders listed in the filing include ...