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Twitter wants $1-B IPO

Files papers with big number that may change after 'road show'

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Twitter's massive growth under CEO Dick Costolo -- Twitter announced it had reached 500 million accounts in 2012, two years after Costolo took over -- produced strong IPO buzz in the past couple of years.

SOEREN STACHE / THE ASSOCIATED PRESS / DPA Enlarge Image

Twitter's massive growth under CEO Dick Costolo -- Twitter announced it had reached 500 million accounts in 2012, two years after Costolo took over -- produced strong IPO buzz in the past couple of years.

One hundred forty characters could be worth $1 billion.

Microblogging service Twitter Inc. publicly filed its paperwork for an initial public offering Thursday, announcing its intention to seek a $1-billion IPO, though that figure could be a placeholder before the company later announces the size and targeted price range for its IPO. The company also did not announce if it will list on the New York Stock Exchange or Nasdaq, though it did say it will use the symbol TWTR.

Evan Williams, Jack Dorsey and Biz Stone originally formulated the idea of Twitter as a group-messaging app in 2006, and many outsiders regarded the service as a novelty early on, a way for people to share inane thoughts 140 characters at a time. Inanity was no longer an issue when Twitter quickly became a go-to feed of real-time events and reactions, as well as a communication platform pliable enough to be handy for activists in the Middle East, politicians in the United States, and aid workers in tsunami-ravaged Japan.

"They turned it from a toy to a tool," Gartner analyst Jake Sorofman said recently, "and now a platform and an ecosystem."

Twitter's massive growth under CEO Dick Costolo -- Twitter announced it had reached 500 million accounts in 2012, two years after Costolo took over -- produced strong IPO buzz in the past couple of years, but neighbour Facebook Inc.'s rough Wall Street debut quieted much of the excitement. The Menlo Park, Calif., company exercised a record-breaking IPO in May 2012 that valued CEO Mark Zuckerberg's creation at more than $100 billion, but problems with initial trades and doubts about Facebook's ability to generate revenues from its popular mobile application helped push shares from an initial price of $38 to less than $20 in the first year of public availability.

Perspectives changed just a couple of months ago, as Twitter reportedly was filing its IPO paperwork confidentially. After showing mobile revenues had accounted for 41 per cent of its $1.6 billion in quarterly advertising revenue, Facebook again became a Wall Street darling, doubling its market capitalization to well above its IPO valuation and passing Intel Corp. to become the sixth-most valuable tech company in Silicon Valley.

Twitter announced Sept. 12 -- appropriately enough, with a tweet -- it had filed IPO paperwork confidentially with the Securities and Exchange Commission, a process that has been in place for less than two years for companies with less than $1 billion in annual revenues.

Like Facebook, Twitter generates its revenues from advertisements, with businesses paying to promote their tweets in users' timelines on personal computers and mobile devices. The company has taken pains in the past year to develop its revenue generation by opening its ad platform to third-party software, improving ad targeting with the use of cookies and data-mining, and acquiring companies such as MoPub, which will allow Twitter to offer advertisers real-time auctions for purchasing ads.

The market for technology IPOs has swung Twitter's way of late. After only 22 of the 132 IPOs in the first eight months of the year were in the tech sector, a glut of such companies tested the waters in September and found treasure. In one week's time, six Silicon Valley tech companies brought in more than $1 billion combined, with enterprise-software providers Rocket Fuel and FireEye also experiencing large first-day "pops" that at times doubled their IPO stock price.

Wall Street's direction is also rather favourable for Twitter. While Facebook doubled its stock price in the third quarter, the tech-heavy Nasdaq gained more than 10 per cent, with Yahoo Inc. and Netflix Inc. joining Facebook in setting all-time highs.

Twitter has the option of changing most of the terms of the IPO outlined in its SEC filing -- Facebook increased both the number of shares and its proposed range in the week leading up to its market debut. Companies typically wait at least 21 days between filing paperwork publicly and exercising their IPO in order to meet with potential investors in what's called a 'road show,' which allows executives and underwriters to pitch their initial batch of shares and allocate orders.

With the filing, prospective investors got their first look under Twitter's hood.

Twitter's financials released Thursday show the company booked $253.6 million in revenue in the first half of 2013, up from $122.4 million in the same period last year.

The company saw torrential growth in 2012, when revenue shot up 198 per cent to about $317 million.

But expenses soared along with revenue growth. Twitter lost $69.2 million in the first half of 2013, compared with a loss of $49.1 million a year earlier. It lost about $79 million in 2012.

"Since our inception, we have incurred significant operating losses, and, as of June 30, 2013, we had an accumulated deficit of $418.6 million," it said in the filing.

 

-- San Jose Mercury News, with files from the Los Angeles Times

Republished from the Winnipeg Free Press print edition October 4, 2013 B6

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Updated on Friday, October 4, 2013 at 6:56 AM CDT: Replaces photo

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