City is all a-Twitter over IPO

Another day, another big flotation announcement. Although investors would like more detail...

by Emma Haslett
Last Updated: 16 Oct 2013

It’s set the wheels in motion for revolution, left half the UK’s population with a mild form of ADHD and provided us with an insight into the innermost thoughts of Kim Kardashian (latest communiqué: ‘just learned to cook a new meal for my love! #yummy’). Now, we have come a step closer to owning a slice of Twitter, after it filed documents with the US Securities and Exchange Commission last night.

It’s all been done very quietly: although analysts had expected the company to IPO at some point, it wasn’t supposed to be for a year or so.

But you can see why its founders, Jack Dorsey, Evan Williams and Biz Stone, are keen to get cracking. Given the company’s estimated valuation is about $10bn (£6.3bn), between them they stand to make billions, and the fact that Facebook shares have finally recovered after its catastrophic IPO last year is a suggestion that the City has worked up a proper thirst for technology businesses.

Analysts, though, are uncomfortable. Last night, the company’s official account tweeted this:  

… but other than that, the company hasn’t actually shared any information. Not about how it’s doing financially, not about how much of itself it plans to float, not about how much money it hopes to raise, and not about how much it values itself at.

Although most businesses would have to disclose that kind of information at this stage, for Twitter it’s perfectly legal not to: under the Jumpstart Our Business Startups Act (also known – rather sycophantically – as JOBS), signed into law last year, companies with revenues of less than $1bn are allowed to file IPO documents confidentially.

Although investors aren’t happy, it makes sense for Twitter. After the hype surrounding Facebook’s flotation last year and the subsequent crash of its share price, chief executive Dick Costolo is clearly keen to avoid similar speculation. Under the rules, the company will still have to make its financial information public, but not until shortly before the flotation takes place. Which suits the notoriously private Twitter just fine.

From a UK point of view, it’s interesting that Twitter and Royal Mail have both announced plans to float within the same week. When you compare one of the world’s oldest mass communication businesses (founded: 1516) with one of the world’s newest mass communication businesses (founded: 490 years later), it’s hard not to take the view that Royal Mail’s flotation is overdue.

Twitter by numbers

44 million

The number of users following Justin Bieber, the world's most-followed tweeter

$583m

estimated revenues expected from advertising this year, accouring to research group eMarketer

135 characters

the length of the tweet announcing Twitter’s intention to IPO

$9bn

Twitter’s current estimated valuation

400 million

the number of tweets sent per day

555 million

the number of users registered on Twitter

$44.75

the current share price of Facebook, which fell to a low of $18.05 in August last year following its $38 flotation in May

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