Many financial analysts are calling Twitter the anti-Facebook IPO. It is one of the most hotly anticipated IPOs since Facebook, but Twitter is trying to really differentiate its initial public offering from the Facebook mess. The latter has become a good case study on how not to handle taking your company public.
Twitter is pricing its shares more modestly so it has more growing room when it does go public, according to analysts. It also will likely offer a smaller cut of the company than Facebook to increase demand.
Twitter’s caution in its IPO was clear last week when it announced by Tweet that it had submitted paperwork – confidentially – to start selling stock.
This was the polar opposite of the big announcement from Facebook in early 2012.This gave investors a very early and revealing look at all aspects of Facebook’s financial performance.
Every subsequent public filing from Facebook got a lot of scrutiny. One of the biggest issues was Facebook’s poor mobile advertising revenues. Facebook sold about $17 billion in stock in May 2012, but its share price dropped in the months after, as investors doubted the company’s ability to make revenue from its 1 billion user base.
In its IPO plans, Twitter has taken advantage of a law that lets a company with under $1 billion in annual revenues to keep its financial information confidential from competitors and the press – until it starts to actively market stock.
Twitter is seizing on a chance to sell stock, and Facebook ironically is partially the reason. Investors have gotten used to buying social media stock, and this is going to accelerate as mobile advertising revenues increase.
Facebook’s shares hit a high of $45 recently, well above the $38 IPO price. LinkedIn also is trading at high levels, after it sold another $1 billion in stock to investors.
Twitter is expected to have its IPO by the end of 2013, which would take advantage of the dramatic comeback for Facebook with investors, and also with the continued success of LinkedIn.