Friday, 4 October 2013

Everything About Twitter IPO: Learn From The Pros

You must have heard lots of stuff about Twitter IPO. Or you're probably confused, and don't have a clue what it is.
First of all, lets start with the definition.
 Wikinvest defines IPO as:
An initial public offering, or IPO, is the first sale of a corporation's common shares to investors on a public stock exchange. The main purpose of an IPO is to raise capital for the corporation. While IPOs are effective at raising capital, being listed on a stock exchange comes with heavy regulatory compliance and reporting requirements.

The term IPO only refers to the first public issuance of a company's shares. It assumes a company is big enough, successful enough, and has the required track record to raise capital in the public equity market. If a company later sells newly issued shares again to the market, it is called a seasoned equity offering. When a shareholder sells shares, it is called a secondary offering and the shareholder, not the company that originally issued the shares, retains the proceeds of the offering. These terms are often confused and only a company which issues shares can make a primary offering or IPO. Secondary offerings occur on the secondary market, where shareholders (not the issuing company) buy and sell shares from and to each other.


This is what some professionals around world are saying about Twitter IPO:


Jack Dorsey:
Twitter was born on March 21, 2006, with just 24 characters.

We started with a simple idea: share what you’re doing, 140 characters at a time. People took that idea and strengthened it by using @names to have public conversations, #hashtags to organize movements, and Retweets to spread news around the world. Twitter represents a service shaped by the people, for the people.

The mission we serve as Twitter, Inc. is to give everyone the power to create and share ideas and information instantly without barriers. Our business and revenue will always follow that mission in ways that improve–and do not detract from–a free and global conversation.

Thank you for supporting us through your Tweets, your business, and now, your potential ownership of this service we continue to build with you.

Yours,
@twitter
By Jack Dorsey


David Benoit
The filing says Twitter will seek to raise up to $1 billion.

The number should be considered a placeholder for now. Filers are required to give an amount on their first filing, but Twitter could ultimately raise much more or even less. Facebook’s first filing, for instance, said it was seeking to raise up to $5 billion, but most knew the final IPO would raise multiples more. It ultimately priced a deal that raised over $16 billion.

Here’s what Twitter says it will do with the funds it raises: “The principal purposes of this offering are to increase our capitalization and financial flexibility, create a public market for our common stock and enable access to the public equity markets for us and our stockholders.”

“We intend to use the net proceeds from this offering for general corporate purposes, including working capital, operating expenses and capital expenditures. We anticipate making capital expenditures in 2013 of approximately $225 million to $275 million, and we may use a portion of the net proceeds to fund our anticipated capital expenditures. We also may use a portion of the net proceeds to satisfy our anticipated tax withholding and remittance obligations related to the settlement of our outstanding Pre-2013 RSUs, or we may choose to allow our employees who are not executive officers holding such awards to sell shares of our common stock in the public market to satisfy their income tax obligations related to the vesting and settlement of such awards.


“Additionally, we may use a portion of the net proceeds to acquire businesses, products, services or technologies. However, except for our proposed acquisition of MoPub in exchange for shares of our common stock, we do not have agreements or commitments for any material acquisitions at this time.”
By David Benoit

Paul Vigna
The biggest risk factor for Twitter, the company says, is simply that its users remain engaged with the service.

"If people do not perceive our products and services to be useful, reliable and trustworthy, we may not be able to attract users or increase the frequency of their engagement with our platform and the ads that we display."

Or, to put it simply, if people get bored and drift off, the company will have problems.
By Paul Vigna

Steven Russolillo
Twitter didn’t announce whether it chose the New York Stock Exchange or the Nasdaq Stock Market for its primary stock listing. That means a continued waiting game for the exchange operators, who stand to reap fees as well as bragging rights if they snag the high-profile listing.

It’s not unusual for a company to delay its decision regarding which U.S. stock exchange it will choose for its primary listing, or to keep the choice close to the vest for a while. Companies often file documents without language relating to who they’ve chosen as their primary exchange.

In 2012, Facebook tabbed Nasdaq, although the social network didn't make that announcement in its S-1.

Dating back to Facebook's debut in May 2012, 113 companies have chosen the NYSE as their primary stock listing, while the Nasdaq has been home to 117 new listings, according to data compiled by Dealogic.

In considering which exchange to choose, companies often look at the costs associated with listing on a particular exchange as well as the promotional efforts and exchange will make to raise a corporation’s profile, including events like the NYSE’s or Nasdaq’s opening and closing bell ceremonies. Exchanges offer corporations various other services for a variety of needs, such as investor relations.

NYSE Euronext, which owns the NYSE, and Nasdaq OMX Group Inc., owner of the Nasdaq, have battled for years for some of the top stock listings by offering incentives such as co-branding possibilities and prime advertising space.

Among some high-profile tech listings in recent years, both exchanges have scored big wins. In 2011, NYSE nabbed LinkedIn Corp. and Pandora Media Inc., while Nasdaq won Groupon Inc. and Zynga Inc.
By Steven Russolillo.



Paul Vigna
Sure, Twitter's popular today, and this IPO will get bring it a ton of attention. But the company's philosophical about its future, and acknowledges in the risk factors that the winds of change have blown against other hot spots, and could some day blow against Twitter.

"A number of consumer-oriented websites that achieved early popularity have since seen their user bases or levels of engagement decline, in some cases precipitously. There is no guarantee that we will not experience a similar erosion of our user base or engagement levels."

Specifically, the company lists these risks:

- "Users engage with other products, services or activities as an alternative to ours;

- "Influential users, such as world leaders, government officials, celebrities, athletes, journalists, sports teams, media outlets and brands or certain age demographics conclude that an alternative product or service is more relevant;

- "We are unable to convince potential new users of the value and usefulness of our products and services;

- "There is a decrease in the perceived quality of the content generated by our users;

- "We fail to introduce new and improved products or services or if we introduce new products or services that are not favorably received."