Twitter's long expected IPO filing is a reality.
The company announced that it had filed documents with the Securities and Exchange Commission to start the IPO process. It took advantage of a provision of the JOBS Act that allows "emerging growth companies," companies with less than $1 billion in annual revenue, to start the IPO process confidentially.
Three weeks before Twitter starts marketing itself to potential investors, it will have to make its filing public and release detailed financial information — such as its annual revenue, profit margins, debt, how much it intends to raise in an IPO, and what it plans to do with the money, among other things. Twitter had $350 million in revenue in 2012 and isn't expected to hit $1 billion until next year.
Twitter's IPO is the first highly anticipated technology IPO since Facebook's disastrous initial offering in May last year. Other notable tech companies that have gone public in recent years such as Zynga, Groupon, Yelp, and LinkedIn have had mixed success, with the two former performing poorly and the latter two outperforming.
Facebook only recently surpassed its IPO price of $38. Facebook CEO Mark Zuckerberg actually had some advice for Twitter during his question and answer session at Tech Crunch Disrupt yesterday: "As long as Twitter — this goes for all these private companies — as long as they focus on what they're doing [going public is] wonderful."
Included among Twitter's current investors are Andreessen Horowitz, Union Square Ventures, T. Rowe Price, Charles River Ventures, and GSV Capital, among others.
The possibility of a Twitter IPO has been a topic of conversation for the business media for at least two years. And while Twitter itself has always maintained that it was in no rush to go public, recent moves by the company — among them acquisitions, strategic hires, and tweaks to its service to make it more appealing to a broader user base — made clear that a filing was imminent. That Twitter has confidentially filed suggests that the company believes its financials are in enough order to merit going public, rather than waiting an additional quarter — which it considered doing, per an earlier report from Bloomberg.
Proceeds from an IPO are typically earmarked for such things as international expansion and acquisitions, which often go hand-in-hand. For its part, Twitter has been on an acquisition spree in the past few months — its most recent deal came earlier this week when it spent a reported $350 million to buy mobile advertising exchange MoPub. Prior to that Twitter acquired TV social analytics companies Bluefin Labs and Trendrr.
Twitter's deals have been aimed at being able to leverage the social conversations that take place on it service, particularly around live events, into revenue streams via promoted tweets and ads. Essentially, Twitter has to demonstrate to companies and brands that its advertisements lead to purchases from Twitter users. The higher the conversation rate, the more Twitter can charge for the ad.
Twitter and Facebook are also currently in a heated battle to convince both users and investors that its service is the go-to place for conversations around live events. Of course, with more than one billion users Facebook is a lot bigger than Twitter, which has more than 200 million active users. Facebook recently added features like hashtags in order to drive additional conversations around live events like TV shows.
Bloomberg TV and CNBC both reported that Goldman Sachs would act as lead underwriter on the deal, beating out Morgan Stanley, which got the top spot for the Facebook IPO. Serving as lead underwriter positions Goldman Sachs to reap a windfall in fees from the offering.
Update: This story has been updated to include additional information and details.