Twitter unseals IPO papers, hopes to raise $1B

  • Article by: VINDU GOEL and MICHAEL J. DE LA MERCED , New York Times
  • Updated: October 3, 2013 - 10:31 PM

The social media company, planning a $1 billion IPO, hasn’t yet turned a profit. But its mobile revenue is growing.

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FILE - In this Feb. 2, 2013, file photo, a smartphone display shows the Twitter logo in Berlin, Germany, Twitter unsealed the documents Thursday, Oct. 3, 2013, for its planned initial public offering of stock and says it hopes to raise up to $1 billion. (AP Photo/dpa, Soeren Stache, File) ORG XMIT: MIN2013100316463352

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– If Lady Gaga were to send a message to her 40 million Twitter followers summarizing the company’s debut on Wall Street, it might very well say: “Twitter IPO. Mobile. Born This Way.”

Twitter, which was built on messages so short that they could be texted on a cellphone, revealed Thursday just how central smartphones and tablets are to its business — underscoring the technology industry’s rapid transition to a mobile world.

But despite clear evidence that it is quickly increasing its revenue from mobile advertising, the company also disclosed that it had not yet turned a profit, that it had been steadily losing money and that its user growth had been slowing significantly since the end of last year.

Last month, the company announced that it would go public but had filed confidential papers. On Thursday, it made its prospectus public, providing a first glimpse at its financial health.

The Twitter initial public offering — the most hotly anticipated stock sale since Facebook’s last year — will make early employees and investors in the company very rich.

Evan Williams, one of the company’s founders, owns 12 percent of the company, a stake valued at $1.2 billion in August, when the company last priced its employee stock options. Jack Dorsey, another co-founder, owns stock worth about $483 million.

Twitter’s impending public offering seizes on the continued growth of social networking and mobile devices, two trends the company has ridden to enormous growth. Founded seven years ago as a side project in a floundering start-up firm, it is now one of the world’s biggest public forums, ranking alongside Facebook. Aspects of the service, like hashtags denoting specific discussion topics, have infiltrated popular culture.

The company has turned its deceptively simple product, messages no longer than 140 characters, into a global phenomenon. It has found a way to make money through advertising, notably through sponsored tweets that resemble regular users’ posts.

And much of that advertising revenue is on mobile.

In its filing, Twitter said that 75 percent of its users entered the service through mobile devices during the second quarter and that 65 percent of its revenue came from mobile ads.

Twitter’s revenue for the first half of this year was $253.6 million, more than double the amount it brought in during the same period last year.

Yet Twitter has been steadily losing money, reporting a net loss of $79 million last year and $69 million for the first six months of 2013, although some analysts said such losses were not unreasonable for a young, fast-growing company.

Twitter has not set a price for its offering. But when it last set an internal price for employees, in August, it valued the stock at $20.62 a share, suggesting a value of $9.7 billion. That figure is equal to 22 times the sales that the company posted in the 12 months through June. Such a valuation is high, even for a young tech company, analysts say.

The social network disclosed that it planned to use the ticker symbol TWTR, but it did not specify a stock exchange. It also listed a $1 billion fundraising target, a pro forma number meant to calculate listing fees.

With the regulatory filing Thursday, Twitter now has to wait at least three weeks until it kicks off a publicity campaign to potential investors across the country, in what is expected to be a series of standing-room-only meetings.

The company hopes to complete its offering by Thanksgiving, people briefed on the matter have said. But if the markets prove unwelcoming, the company is likely to postpone the offering until next year.

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  • Many of Twitter’s 2,000 employees work at its global headquarters in San Francisco. The company, which plans to go public sometime after Thanksgiving, expects to raise $1 billion from investors.

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