Following Twitter’s #IPO

By Ben Walsh
October 4, 2013

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Twitter has finally filed public IPO papers, giving the world a look at its financials for the first time. The news sent shares of Tweeter, a home sound system company, up 1,500% at one point simply because its ticker, TWTRQ, can be confused with TWTR, the symbol Twitter will use when it actually does go public. Dan Primack’s sources tell him that will happen on November 8.

The reaction to Twitter’s financial disclosures was a bit more muted. Kara Swisher has a good rundown of the numbers: The company lost $79 million in 2012 on revenue of $317 million, and lost $69 million on $254 million in the first half of this year. Peter Eavis writes that Twitter’s IPO could value the company at $12 billion. Even at Twitter’s August valuation of $9.7 billion, investors valued the company at 22 times revenue, which he says is high for a tech company. Facebook is currently trading at 12 times the revenue analysts project it will earn next year, Eavis adds. Cyrus Sanati argues that Twitter is lagging its rivals in the online ad space, and is simply not ready for Wall Street.

Tom Gara writes that Twitter has another looming problem: it can be hard to weed out robots. Bot accounts, he says, “range from entirely robotic (and often incomprehensible) spammers to more cleverly programmed accounts spitting out tweets designed to find their way into the occasional search results or discussion thread.” CNET reports that Twitter went on something of a bot-killing spree in the months leading up to its IPO filing.

Twitter won’t say how many accounts of this kind it killed, but it may help explain why, in Mike Isaac’s words, Twitter has a growth problem. As AllThingsD reported last month, sources indicated that Twitter had averaged in the range of 230 million to 240 million monthly active users recently, making it unlikely that Twitter will hit CEO Dick Costolo’s goal of having 400 million monthly active users by the end of the year.

Quartz’s Zach Seward analyzes the edits Twitter made to its filing before releasing the first public version. Seward’s headline is admittedly a little click-baity, but the content of the post is great. From earlier versions of the filing, Seward deduces that Twitter hired 300 people in the second quarter, growing from 1,697 employees to about 2,000. Some add-ons are standard corporatease (“platform” becomes “global platform”), but there were substantive changes in the way the company talks about its advertising revenues:

The second draft of the IPO prospectus, submitted on August 21, added a disclosure that the cost of advertising on Twitter had declined and could continue to drop. The third draft, on September 9, noted that Twitter’s ability to display ads within its mobile applications is more limited than on desktop computers, but people increasingly prefer to use Twitter on mobile. And in the fourth draft, submitted on September 26, Twitter added several more references to the risk that “ad engagement”—essentially, whether people clicks on paid tweets—could decline.

The concern that people won’t click on ads is basically what Mathew Ingram calls “The Facebook Problem” (formerly known as “the MySpace problem”). Exactly how much can Twitter juice its ad revenues before it starts losing users? Dan Primack wonders if we’re losing something else with Twitter’s IPO: this could be the last of the social media juggernauts — think Facebook, Zynga, Groupon, and LinkedIn — to make a splash in the public markets. — Ryan McCarthy and Ben Walsh

On to today’s links:

Twitter
Everything you need to know about Twitter’s IPO – WSJ
The little-known Hollywood investor who’s going to make a killing on Twitter’s IPO – Reuters

Popular Myths
The most often repeated fact about US debt is wrong – Matt Phillips

JPMorgan
Jamie Dimon to relinquish his role as chairman of JPMorgan’s bank unit – Bloomberg

New Normal
It’s not just people. Corporations are getting more unequal, too – WaPo

Old Abnormal
The 30th anniversary of the best jobs report ever – James Pethokoukis

Wonks
Raising the minimum wage doesn’t seem to reduce minimum wage jobs – Arindrajit Dube

Alpha
“Dan Loeb only comes off like a condescending asshole on paper: sources” – Dealbreaker

Quotable
Thom Yorke on Spotify: “this is is like the last fart, the last desperate fart of a dying corpse” – Metro

Right On
The Economist’s finance editor says goodbye with a really nice essay – The Economist

Oxpeckers
The big lie of the post-crisis era – Ryan Chittum

Facebook
Why Facebook is building data centers in the arctic circle – Bloomberg BusinessWeek

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