Tags: Twitter | IPO | venture | JOBS Act

Quartz: Twitter May Seek Last-Minute IPO with a Sky-High Valuation

Wednesday, 27 Feb 2013 01:51 PM

By John Morgan

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Twitter may pursue a “secret” initial public offering (IPO) using federal job incentives, and the resulting valuation could be colossal, according to growing media speculation.

Twitter is likely eligible to go public under the Jumpstart Our Business Startups (JOBS) Act, which lets firms with less than $1 billion in revenue keep their IPO filings under wraps until only three weeks before their marketing road show for investors, Quartz reported.

The JOBS Act was successfully pursued by Silicon Valley venture capitalists, who claimed it would stop a recent decline in IPOs by slashing costly reporting burdens on smaller firms.

Video: Economist Predicts 'Unthinkable' for 2013 

Without it, companies must painstakingly release their financials and written strategy months ahead of time, giving investors (or competitors) a long time to evaluate the company.

Quartz reported if Twitter invokes the JOBS Act provisions to go public, the reaction may be negative. It noted the company had $350 million in 2012 revenue and has about 1,000 employees — thus it does not precisely meet the small-company profile the law is intended to help.

Nevertheless, Quartz ticked off a variety of reasons why Twitter may feel compelled to go the last-minute IPO route.

“Keeping its IPO filing secret until the last minute could help Twitter avoid the overheated anticipation that Facebook had to deal with ahead of its disastrous IPO. It could keep its financial details away from rivals for a few extra months, as it grows a mobile advertising business that might compete with Facebook’s or LinkedIn’s,” Quartz reported.

“And if Twitter would rather keep some of its early history under wraps, it could avoid an outside audit and submit just two years of financial statements, as opposed to the customary five.”

The Wall Street Journal’s corporate news editor, Dennis Berman, used glowing superlatives to describe Twitter’s potential as a public company.

“I spent the last week trying to write a column that proved Twitter wasn’t worth $10 billion. Then the facts intervened,” he wrote.

“Twitter has the potential to match some of the money-gushing properties of the Internet’s greatest money gusher, Google Inc.,” Berman predicted.

eMarketer Inc. forecasts Twitter’s 2014 revenue will hit $808 million, “but people in the venture-capital community are already whispering that Twitter will break $1 billion by then,” Berman wrote. “In fact, eMarketer will soon revise its figures upward though it won’t say by how much.”

Twitter is a high-margin business with low labor costs—its users generate its content with their 400 million daily messages, and also because its advertisers use automated tools to make their buys, The Journal noted.

Berman reported “people in the venture community, including some Twitter backers” say the company has profit margins as high as 40 percent – considerably higher than Google’s 21 percent.

Video: Economist Predicts 'Unthinkable' for 2013

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