De-coding Twitter's Long-Awaited IPO Plans and its Impact

One of the most awaited events in the social media arena is the Twitter IPO.  Here is a look at Twitter’s confidential IPO filing details. 

How Much Will be Raised?

Twitter did not say exactly how much it plans to raise in the IPO, however it listed an estimate of $1 billion.

What is the Estimated Price Range?

The company which plans to trade under the ticker “TWTR,” has not listed its estimated price range yet but that is typically added closer to the actual IPO pricing.

Why Confidential Filing?

Under SEC rules established in the JOBS Act passed last year, so-called “emerging growth companies” can initially file their S-1′s confidentially if their annual revenue is less than $1 billion. Companies do not have to make their IPO filings public until 21 days before the company starts pitching to investors on Wall Street.

To read between the lines, opting for confidential filing implies that Twitter’s annual revenue is less than $1 billion.

User Base

Twitter has a user base of 215 million monthly active users and about 500 million Tweets per day. In its most recent quarter it  had 218.3 million average monthly active users in the three months ending June 30, which is up 44% from the corresponding period in the last year.

Revenues

Details filed reveal that the company is still growing, but is losing money. It also provides some insight into which of the major insiders will be making a sizable wealth from the IPO.

Revenue figures for 2012 stood at $316.9 million, up from $106.3 million in 2011. Net loss was comparatively lower at $79.4 million, as against a net loss of $164.1 million in 2011.

In the first half of this year, Twitter’s revenue was $253.6 million; more than double that of $122.4 million in the corresponding period a year ago. The company had a net loss of $69.3 million in the first half, compared to a net loss of $49.1 million in the corresponding period in the last year.

Revenue Break Up

It might be good for investors to know how much revenue came in from which areas of business.  In the first half of 2013, 87% of the company’s revenue came from advertising, compared to 85% in the year-ago period. Ad rates came down 46% sequentially in its most recent quarter.  This was driven by an increase in ad inventory. Twitter’s three main products now are: Promoted Tweets, Promoted Accounts and Promoted Trends.

Mobile is a big part of the Twitter success story,  the company says 75% of users accessed Twitter through a mobile device in the quarter ending June 30. More than 65% of ad revenue was from mobile devices.

International Growth

Most investors will want to know about this aspect. The overall revenue per timeline view is $0.80 in the quarter ending in June. However it is $2.17 per timeline view in the U.S., while it is just $0.30 in the rest of the world.  This becomes an important issue for Twitter with a user base that is larger globally and has a faster growth. There were 49.2 million MAUs in the US (up 35% year-over-year) and 169.1 MAUs (47%) in the rest of the world.

Major Stakeholders

The major individual shareholders are Twitter cofounder Ev Williams with 12.0% , Twitter cofounder Jack Dorsey with 4.9% and Twitter CEO Dick Costolo with 1.6%.

Major Institutional Shareholders

More than 5% of the company (the exact amount is not revealed in the filing) is held by Benchmark,Rizvi Traverse, Spark Capital, Union Square Ventures and DST.  Benchmark, however, apparently owns about 6.7%, according to the filing.

Other investors include Institutional Venture Partners, Insight Venture Partners, Union Square Ventures, Charles River Ventures, Spark Capital, SV Angel, Chris Sacca, Benchmark Capital, T. Rowe Price, Morgan Stanley, DST Global and Kleiner Perkins Caufield & Byers.

Underwriters to the Issue

Goldman Sachs, Morgan Stanley, JP Morgan, BofA Merrill Lynch and Deutsche Bank Securities are underwriters to the issue.

Recent acquisitions by Twitter

From the point of view of its direction of future growth its acquisitions say a lot. Twitter acquired mobile ad exchange company MoPub for $350 million in stock, exhibiting its larger advertising ambitions beyond its own Twitter ads as MoPub offers ad services on a variety of publishers’ apps beyond Twitter.

As Twitter gets ready with its IPO (the most awaited one since the Facebook IPO) a good way to wrap this up is to take a look at how Twitter has grown:

- Created in 2006, by Ev Williams, Jack Dorsey and Biz Stone, Twitter has acquired phenomenal growth from a quirky startup that people were largely skeptical about, to a major social media phenomenon.

- The company now has television shows using Twitter hashtags to promote their shows. With major brands are lining up things on the advertising front certainly look promising with Twitter partnering with CBS last month to run video ads for 42 CBS shows.