What you need to know about the Twitter IPO

The social network will handle the offering a little differently than its giant rival Facebook.

By Benzinga Sep 13, 2013 2:45PM

copyright Image Source, Image Source, Getty ImagesBy Tim Parker

If you thought a Carl Icahn tweet couldn't be upstaged, you were wrong. Exactly one hour after the closing bell Thursday, Twitter announced on its own site that it had filed a confidential S-1 for a planned IPO. This was huge news.

First, it's Twitter -- the hottest social media site next to Facebook (FB) and with the younger demographic migrating from Facebook to Twitter en masse, Facebook is running a little scared. Recent Facebook feature rollouts include hashtags, the ability to embed statuses, and the ability for certain media outlets to embed a real-time Facebook feed into its broadcasts -- all features Twitter already has that are widely popular.

Second, this is probably the first time many investors have heard of a confidential filing (Reuters). Under the JOBS Act, a company that has less than $1 billion in sales can file confidentially. Twitter won't have to disclose financial information until right before its investor road show.

According to Bloomberg, the confidential filing may be an effort to keep the IPO from becoming as overhyped as Facebook. By the time the IPO priced, Facebook opened at a multiple of 107 times trailing 12 month-earnings. As a result, the stock didn't have that double- or triple-digit percentage gain on its opening day of trading that underwriters hope for. In fact, the stock dropped 53% in its first year of trading.

Twitter doesn't want to be the giant disappointment that Facebook was in year one.

But along with those two key points, other news surfaced. Twitter will use Goldman Sachs (GS) as its underwriter. Goldman's chief competitor, Morgan Stanley (MS) was left out of the deal. Some insiders speculate that its handling of the Facebook IPO left a bad taste in Twitter's mouth.

Next, Twitter won't list on NASDAQ (NDAQ) with the rest of the sexy tech stocks. Again, its embarrassing handling of the Facebook IPO is likely the reason. The recent outages on the exchange can’t be helping either.

The move didn't come as much of a surprise for some. Twitter executives spent their summer talking to the major investment banks (Bloomberg) about the potential IPO and a recent job posting on LinkedIn (LNKD) for a financial reporting manager to handle regulatory filings gave investors a pretty good indication that the announcement was imminent.

Twitter has an estimated market cap of $10 billion -- less than a tenth of Facebook's value, but it has 200 million users and that number is growing fast. Twitter will likely bring in about $500 million in advertising this year and $1 billion in 2014. Speculation is that the IPO will take place in December of this year.

Disclosure: At the time of this writing, Tim Parker had no position in the companies mentioned.

More from Benzinga

Sep 13, 2013 3:39PM

Shouldn't you have put that piece in 140 characters or less?


Sep 13, 2013 6:13PM
This stock will make a lot of regular people millionaires.Smart people will buy a boatload.
Sep 13, 2013 5:28PM
Stay away from that heaping pile of ****!!!!!!
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
100 character limit
Are you sure you want to delete this comment?


Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.


StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

123 rated 1
262 rated 2
480 rated 3
651 rated 4
649 rated 5
629 rated 6
616 rated 7
496 rated 8
346 rated 9
111 rated 10

Top Picks

TAT&T Inc9



Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.