Twitter files for IPO; Goldman is lead underwriter

Twitter said in a tweet tonight that it has confidentially submitted a document to the SEC with plans for an initial public offering of stock.

Goldman Sachs (GS) is the lead underwriter, sources told CNBC. Other underwriters are expected to be named when the S-1 filing is made public.

Shares of social media companies like Facebook (FB) and LinkedIn (LNKD) ticked slightly higher in after-hours trading after Twitter disclosed it had filed.

The company did not reveal any additional details, including any information on timing, other than to confirm the tweet is authentic.

Twitter has been valued at around $10 billion. It's IPO has been long-awaited on Wall Street.

The confidential filing was made under the JOBS act, allowing the company to work with regulators on its plans before making them public.

A company has to have less than $1 billion in revenue to file in secret.

Twitter's revelations comes just days after Facebook shares fully recovered from the plunge they suffered after that company's troubled IPO in May 2012 to reach an all-time high.

http://finance.yahoo.com/news/twitte...210453041.html

There has long been speculation about how many users Twitter actually has, because there was no concrete number about how many accounts were inactive or fake.

The New York Times reported this year that 20 million, or about 4%, of Twitter's users are, in fact, fraudulent. Fake accounts are often made by companies who sell new followers to advertisers that want to build large follower populations quickly.

Well, the mystery is officially solved. According to Twitter's S-1 filing this afternoon, we see that the company estimates that less than 5% of its monthly active users are fake. (Twitter currently has 215 monthly active users, so that's about 10.75 million users that are fake.)

When Facebook IPO'd, it had about 5-6% fake users, so these numbers are pretty close.

Here's exactly what Twitter said in its S-1:

"The numbers of our active users and timeline views are calculated using internal company data that has not been independently verified. While these numbers are based on what we believe to be reasonable calculations for the applicable period of measurement, there are inherent challenges in measuring usage and user engagement across our large user base around the world.

For example, there are a number of false or spam accounts in existence on our platform. We currently estimate that false or spam accounts represent less than 5% of our MAUs. However, this estimate is based on an internal review of a sample of accounts and we apply significant judgment in making this determination. As such, our estimation of false or spam accounts may not accurately represent the actual number of such accounts, and the actual number of false or spam accounts could be higher than we have currently estimated.

We are continually seeking to improve our ability to estimate the total number of spam accounts and eliminate them from the calculation of our active users, but we otherwise treat multiple accounts held by a single person or organization as multiple users for purposes of calculating our active users because we permit people and organizations to have more than one account. Additionally, some accounts used by organizations are used by many people within the organization. As such, the calculations of our active users may not accurately reflect the actual number of people or organizations using our platform."

http://finance.yahoo.com/news/twitte...215043157.html

Twitter has filed for an IPO. This document, called an S-1, is like a cover letter for a young firm trying to impress big institutional investors to buy the stock on Day One (and hold onto it). But in addition to the chest-pumping, every company is obligated to enumerate the risks that could destroy it.

Like the weaknesses part of a cover letter, the risk section is arguably the most interesting part of the S-1. It's where, for example, Facebook famously misled retail investors about its weakening desktop business, before the company had properly built out a mobile business.

Befitting any young, undeveloped, and unprofitable company, Twitter's list of risks is long and wide-ranging, from Maybe we'll stop adding users to Maybe China will ban us forever. Here are the most significant and fascinating risks the company fesses up to (for a full list, go to page 16 of the S-1).

(1) What if Twitter has simply stopped growing? There is some evidence of stagnation. Twitter announced 215 million monthly active users today, meaning "it's added only 15 million since it hit more than 200 million late last year," according to Mike Isaac. Twitter acknowledges that if users top tweeting (or if their tweets are bad and go unread), the company will slowly bleed advertising, as well.

As just one social media/news app in a crowded field, Twitter also acknowledges that its most serious competition has much, much more money, including Facebook (with Instagram), Google, LinkedIn, Microsoft and Yahoo!—and that's just in the U.S. "Facebook operates a social networking site with significantly more users than Twitter and has been introducing features similar to those of Twitter," the company admits.

(2) What if Twitter really never learns how to make serious money? Twitter generates nearly 90 percent of its revenue from advertising and more than half of its revenue from mobile advertising. It has three products -- Promoted Tweets, Promoted Accounts and Promoted Trends -- but none are quite proven. "If we are unable to demonstrate the value of our Promoted Products to advertisers and advertising agencies," Twitter says, it will suffer from both a stagnating user base and a stagnating monetization strategy.

Twitter is trying to introduce new features it can turn into money-gushers. Vine, the six-second video feature, offers another window to serve native ads. Amplify gives TV advertisers the ability to re-target viewers with Promoted Tweets. The company has also teamed with Nielsen to produce a TV rating system which, while generating no revenue today, suggests a future where Twitter sells its data. Still, these initiatives are too young to celebrate or lambast, just yet.

(3) What if Apple or Google design an operating system that ruins the Twitter experience? Twitter isn't vertically integrated. It works on other people's devices, browsers, and operating systems, like Mac OS, Windows, Android, iOS, Chrome and Firefox. "Any changes in such systems, devices or web browsers that degrade the functionality of our products and services or give preferential treatment to competitive products or services could adversely affect usage of our products and services," the company says.

(4) What if Twitter fails to expand internationally? Twitter needs more users. The trouble is that, in many populous and connected countries, it faces competition and other barriers. Twitter is blocked in China. Some countries have nearly identical or highly similar services, like Sina Weibo in China, LINE in Japan and Kakao in South Korea. In other markets, like Europe, government regulation restricts its freedom to advertise. In less developed countries, like India, poor Internet connections makes Twitter less viable. All this matters because the typical monthly unique overseas is worth 23 percent less than an American user.

(5) What if Twitter never manages to turn a profit, at all? "We may not be able to achieve or subsequently maintain profitability," Twitter acknowledges. Indeed, it's lost about $420 million in its lifespan. Although revenue has grown from practically nothing in 2009 to $317 million last year, the company expects that breakneck pace to slow as the user base slows.

(6) What if Twitter suffers the mother of all Fail Whales? Twitter is massive and mostly smooth even during peak hours. But it's still vulnerable to infrastructure breakdowns. In the company's own words:
(7) What if foreign governments get in the way? Around the world, governments and regulators are proposing data-protection and privacy laws that could affect Twitter's business. "These laws and regulations are subject to change and uncertain interpretation," which could cost Twitter, not just future users, but also money paid out in penalties and lawsuits.

(8) What if hackers get in the way? Twitter experiences cyber-attacks "on a regular basis." In February 2013, hackers gained access to 250,000 accounts. "Any such breach or unauthorized access could result in significant legal and financial exposure, damage to our reputation and a loss of confidence in the security of our products and services that could have an adverse effect on our business and operating results," Twitter said.

(9) What if Twitter gets in its own way? Throughout its risk section, the company is candid about all the ways it could screw itself: management fails, a short-term focus that compromises long-term vision; a long-term focus on innovation that takes away from quarter-to-quarter revenue growth; or a breach or massive screw-up that loses the trust of marginal users and devastates growth.

Twitter has unsealed the documents for its planned initial public offering of stock and says it hopes to raise up to $1 billion in one of the year's most eagerly awaited stock market debuts.

The documents revealed for the first time how much money the social networking company makes. Founded in 2006, Twitter has never turned a profit and has an uninterrupted history of losses totaling $419 million since its inception. But its revenue is growing.

....

On Thursday, Twitter Inc. unsealed the papers with the Securities and Exchange Commission, giving potential investors and its users a look inside its business. Twitter was required to unseal its documents at least three weeks before it starts holding events around the country to woo potential investors. At this rate, the company will likely price its IPO by Thanksgiving.

According to the IPO filings, Twitter generated $317 million in revenue in 2012 and had more than 218 million active users in the second quarter, up 44 percent from a year earlier. That compares with nearly 1.2 billion for Facebook and 240 million for LinkedIn.

Three-quarters of Twitter users accessed the service from a mobile device in the second quarter, and 65 percent of its advertising revenue was generated from mobile in the same period. That's more than the 71 percent and the 41 percent, respectively, for Facebook in the same period.

Twitter also said that it lost $69.3 million in the first six months of 2013, compared with a loss of $49.1 million in the same period last year. Revenue more than doubled to $254 million from $122 million. The revenue figures are largely in line with what analysts have been expecting. Research firm eMarketer had projected ad revenue for all of 2013 at $583 million.

Gartner analyst Brian Blau said the company's expenditures "seemed to be a little bit higher than what I had imagined," but he said it wasn't "totally out of whack" for a growing company that's investing a lot in its business. Twitter says it expects capital expenditures of $225 million to $275 million this year.

During the first six months of 2013, Twitter got nearly all of its revenue — 87 percent — from advertising. Advertisers pay Twitter to insert their tweets, accounts or topics into users' feeds. Burger King, for example, recently promoted its new lower-calorie fries, called "statisfries," on Twitter.

Twitter's IPO has been long expected. The San Francisco-based company has been ramping up its advertising products and working to boost ad revenue in preparation. But it is still tiny compared with Facebook, which saw its hotly anticipated IPO implode last year amid worries about its ability to grow mobile ad revenue. Facebook has since made a comeback, having proven that it is able to generate money from mobile advertisements. Its stock price has been hovering around $50, up from its $38 IPO price.

Twitter's moneymaking potential has minted the company with an estimated market value of $10 billion, based on the appraisals of venture capitalists and other early investors. The IPO could value it higher or lower. PrivCo analyst Sam Hamadeh expects Twitter to aim for a market value of about $15 billion when it prices its IPO.

A big part of Twitter's appeal is in its simplicity. Users send short messages — either public or private — that consist of up to 140 characters. Anyone can "follow" anyone else, but the relationship doesn't have to be reciprocal, which makes the service especially attractive for celebrities and companies that use Twitter to communicate directly with customers.

Twitter has 2,000 employees, up from 200 at the start of 2010.

Twitter did not say which stock exchange it plans to list its shares on, though the company said it intends to use the ticker symbol "TWTR." It also doesn't say how many shares it plans to offer, or at what price.

The underwriters of the offering are Goldman Sachs, Morgan Stanley, JP Morgan, BofA Merrill Lynch, Deutsche Bank Securities and CODE Advisors.

http://finance.yahoo.com/news/twitte...211942252.html

Twitter late Thursday filed for a roughly $1 billion initial public offering, revealing revenue on track to double this year with strong mobile ads, but persistent losses.

The short-messaging service said 65% of its advertising revenue came via mobile ads in Q2.

Twitter logged $253.6 million in sales for the first six months of 2013, up 107% from $122.4 million in the year-earlier period.

Revenue nearly tripled to $316.9 million in 2012 from $106.3 million in 2011.

Twitter lost $69.3 million in the first half of the year vs. $79.4 million during all of 2012.

"Since our inception, we have incurred significant operating losses," the company said, citing an accumulated deficit of $418.6 million. It has about $165 million in cash or equivalents.

Twitter had 218 million active monthly users during Q2, up 44%. More than 100 million log in each day. Users are posting about 500 million daily messages. It's developed several revenue streams, including "sponsored" tweets, to monetize traffic.

Like rival social network Facebook (FB), Twitter is attempting to capitalize on robust mobile use by building advertising technology that targets handsets. Research spending at Twitter more than doubled to $111.8 million in the first half of the year.

Most Twitter revenue comes via ads, which are displayed within a stream of followed tweets. About 75% of monthly users log in on mobile devices.

Twitter expects to have about 472.6 million shares outstanding following the offer. It incorporated in Delaware in 2007 and has some 2,000 employees.

http://finance.yahoo.com/news/twitte...230500261.html

Twitter Inc's bankers contacted early investors this week asking them to sign a 180-day lock-up agreement by Wednesday afternoon, showing the company is moving swiftly toward its initial public offering.

The email from Goldman Sachs, the lead underwriter of Twitter's IPO, asked shareholders to sign and return a form by 5 pm Pacific time on Wednesday acknowledging that they would be prohibited from selling shares for 6 months after the firm lists, according to two shareholders who received the email.

Companies often use lock-up agreements to prevent insiders from selling shares simultaneously following an IPO, thereby flooding the market and depressing the stock price.

http://finance.yahoo.com/news/twitte...020422449.html

Looking through Twitter’s financial results, one number seems potentially out of whack for a major, public tech company, especially one that could soon have a stock market value of $15 billion to $20 billion. Twitter spent a whopping 44% of its revenue, or almost $112 million, on research and development through the first half of 2013.

Facebook (FB) spent 19% of its revenue on R&D over the same period. Review listing app Yelp (YELP), which has a market cap under $5 billion, spent 15%. Bigger companies spend far less even than that. Apple (AAPL) allocated just 2.5% of its revenue to R&D over the nine months ended June 30.

The rate of spending is also far higher than Google’s (GOOG) research budget was back when it went public. It spent $91 million, or a little under 10% of its revenue, on R&D in 2003 and $35 million, or 9% of revenue, in the first quarter of 2004.

Twitter's massive spending on future projects could create valuable services down the line but cuts sharply into the bottom line at present.

A long-term drag?

And Twitter's R&D issue doesn’t sound like it’s going to go away anytime soon. “We anticipate a significant increase in research and development expenses in the year ending December 31, 2013,” Twitter said in its filing Thursday.

“We expect that research and development costs will increase in dollar amount for the foreseeable future and vary in the near term from period to period as a percentage of revenue,” Twitter added.

In some ways, the tactic resembles the way Jeff Bezos runs Amazon (AMZN). Potential profits generated from selling books and toys are plowed back into funding smaller, growth businesses like cloud hosting and ebooks instead of flowing to the bottom line.

http://finance.yahoo.com/blogs/the-e...233713621.html

Twitter likes to measure its advertising revenue for every 1,000 timeline views, (for some reason, they call it "advertising revenue per timeline view," as if they're counting one at a time, but ignore that for now because it's confusing). What counts as a view? It's every timeline "requested when registered users visit Twitter, refresh a timeline or view search results while logged in," either from your desktop or mobile device. Across the entire world, the company makes .80 cents per thousand views, or $0.0008 each time you look at your feed.

But all views are not worth the same. In the United States, the value is $2.17 per thousand views, or $0.00217 per time you refresh. Elsewhere, it's $0.30 per thousand, or $0.00030 per refresh. That's why even though 77 percent of Twitters 215 million monthly users come from outside the U.S., only 25 percent of its revenue comes from advertising to them.

There might be billions of potential new Twitter fans around the world. But the most valuable ones by far are right here in the U.S.

http://finance.yahoo.com/news/heres-...232200573.html

Twitter's IPO filing contains a lot of bad news for people who might be interested in buying the stock when it goes public.

User growth is slowing. Twitter has 218 million active users, and already user growth is slowing. In the last quarter, Twitter added only 1 million monthly active users in the U.S. All its remaining growth was abroad. Among Americans, Twitter looks like it has fully tapped out the market, or close to. To put that in perspective, Facebook has more than 1 billion users and is still growing. It's adding way more than 1 million users per quarter in the U.S., too.

Revenue growth will slow in the future, the company warns.

And employee costs are out of control. The largest portion of Twitter's costs is R&D, which it defines in large part as salaries for engineers. Twitter has 2,000 employees — a massive number for such a simple-looking product. Twitter says, "From January 1, 2010 to June 30, 2013, we increased the size of our workforce by more than 1,800 employees."

They're not all engineers, but R&D/engineering costs are the major reason Twitter loses money every quarter.

The next issue is Twitter's vulnerability to Facebook, and other apps and social media, which it warns about specifically in the S-1:

... following Facebook’s acquisition of Instagram, Facebook disabled Instagram’s photo integration with Twitter such that Instagram photos are no longer viewable within Tweets and users are now re-directed to Instagram to view Instagram photos through a link within a Tweet. As a result, our users may be less likely to click on links to Instagram photos in Tweets, and Instagram users may be less likely to tweet or remain active users of Twitter. Any similar elimination of integration with Twitter in the future, whether by Facebook or others, may adversely impact our business and operating results.

It is not likely that Apple or Google (via Android) will suddenly switch off Twitter integrations in their products. But again, they might. Twitter depends on its partners, not the other way around.

The bottom line is this: Twitter is a growing company with robust revenues. It still has a ways to go.

But its opening financials and metrics are messy, and they compare poorly to Facebook's S-1 a year ago, which showed a wildly profitable company with no major problems in front of it.

http://finance.yahoo.com/news/heck-w...232922745.html

Twitter boosts IPO range amid strong investor demand

Twitter Inc raised the top end of its IPO price range by 25 percent and will close its books a day early, signaling strong demand for the most closely watched Silicon Valley debut since Facebook Inc last year.

Amid a red-hot market for initial public offerings and soaring equity markets, Twitter raised its price range to $23 to $25 per share on Monday, but kept the offering size at 70 million shares. That means it will raise up to $2 billion if an overallotment option of 10.5 million shares is exercised.

Sources close to the situation said demand among institutional investors was so strong that the final pricing is likely to go even higher than the new range announced on Monday. The sources declined to be identified because the sales process is not public.

One of the sources said Twitter's IPO is now "massively" oversubscribed and underwriters are looking to select investors who plan to hold the stock for a longer duration rather than traders wanting to do a quick flip.

The IPO is set to price on Wednesday, with shares to begin trading on the New York Stock Exchange on Thursday. The previous price range was $17 to $20 a share.

The new pricing would value the company at up to $13.6 billion, or about 12.5 to 13.6 times forecast 2014 revenue of $1 billion, according to eMarketer. Both Facebook and LinkedIn Corp trade at about 12 times forecast 2014 revenue.

Several equity research analysts said they expect Twitter shares to rise after they begin trading, with some setting their one-year price target as high as $52.

http://finance.yahoo.com/news/twitte...142818873.html

LOS ANGELES (AP) -- They loved it. Now they hate it.

A growing number of celebrities, athletes and self-promoters are burnt out and signing off of Twitter. Many have gotten overwhelmed.

Some people built big audiences on the short messaging service only to have their followers turn against them. Others complain that tweets that once drew lots of attention now get lost in the noise.

As Twitter Inc. prepares to go public this week, the company is selling potential investors on the idea that its user base of 232 million will continue to grow along with the 500 million tweets that are sent each day. The company's revenue depends on ads it inserts into the stream of messages.

But Wall Street could lose its big bet on social media if prolific tweeters lose their voice.

Evidence of Twitter burnout isn't hard to find. Just look at the celebrities who - at one time or another - have taken a break from the service. The long list includes everyone from Alec Baldwin to Miley Cyrus to "Lost" co-creator Damon Lindelof.

Actress Jennifer Love Hewitt lamented "all the negativity" she saw on the service when she quit, temporarily, in July. Actress Megan Fox left nearly a million followers dangling when she checked out in January, explaining that "Facebook is as much as I can handle." Pop star John Mayer deleted his account in 2011, saying Twitter absorbed so much of his thinking, he couldn't write a song.

"I was a tweetaholic," he told students during a talk at the Berklee College of Music.

If Twitter turns off celebrities who have a financial incentive to stay in close contact with fans, how can the company prevent average users from becoming disenchanted?

For some users, Twitter tiredness sets in slowly. At first, they enjoy seeing their tweets of 140 characters or less bounce around the Web with retweets and favorites. But new connections soon get overwhelming. Obligation sets in - not only to post more, but to reply to followers and read their tweets.

Many users conclude that Twitter is a time-sucking seduction and turn away. One who calls herself patrilla$$$thrilla excitedly tweeted "first tweet, wocka wocka" just after she joined in July.

On Wednesday, 161 tweets and 27 followers later, the romance was over. She quit to "fully enjoy the little details in life I miss because I'm too busy here," she tweeted.

The cacophony creeps into everyday life. Twitter fanatics tweet from the dinner table, during a movie, in the bathroom, in bed. Vacations can seem like time wasted not tweeting.

The over-doers suffer from a "fear of missing out" (or FOMO), says Tom Edwards, vice president at themarketingarm, a Dallas-based advertising agency. "Managing our virtual personas, including all of the etiquette that comes with, can be tiresome, especially for those with large followings."

It happens -even to people who ought to know better. Just ask Gary Schirr, an assistant professor who teaches a course on social media at Radford University.

In August, while vacationing on a beach, Schirr felt a pang of withdrawal because he had stopped tweeting to his 70,000-plus followers. Then he saw an old condemned house about to be washed away and posted a photo to Facebook and Twitter. He felt relieved when the likes and retweets rolled in.

"You feel forgotten if you're not out there," he says. "It's another sign of addiction. You feel bad if you don't tweet."

Prolific tweeters stay engaged partly because there are real benefits to a big following, which usually requires tweeting a lot.

Journalists who have large Twitter followings have used them to land better-paying jobs because every click on stories can make more money for their new employer. Actors can land roles on TV or the movies if their digital audience is expected to tag along.

Matt Lewis, a columnist with The Week magazine, says his Twitter following is like "portable equity" that gave him an edge over more established writers earlier in his career. He's now got nearly 33,000 followers.

Even so, one of Lewis' more popular stories is titled "Why I hate Twitter." It goes into why the social network became, for him, "a dark place" overrun by "angry cynics and partisan cranks." He became demoralized by the criticism, but he couldn't pull himself away.

"It's also like a prison. You can't check out," he says.

Today, Lewis rarely interacts with his followers and hopes the service will come up with new ways to filter out the hate tweets. "Why should I be harassed if I look at my (at) button?" he says.

But he remains amazed at how Twitter has helped him reach new readers, and after some 67,000 tweets, he isn't giving it up.

Others find that as more people join the service, the deluge of tweets can drown out individual voices.

So says Bob Lefsetz, a music industry analyst who writes an email column titled the Lefsetz Letter.

Twitter, he wrote in July, is "toast." "Over. Done. History." His follower count isn't rising as quickly as before, although it's still a respectable 57,000-plus. And his tweets don't see as much action as in the past, which he attributes to too many people tweeting "too much irrelevant information."

"In the old days, I'd get 20 retweets. Now I'll get none," Lefsetz says. "It makes me not want to play."

Along with the potential for burnout, there's also the risk that Twitter becomes uncool to the younger generation, especially when services such as Pinterest and Instagram are a tap away.

Devon Powers, an assistant professor of communications at Drexel University, says many of her students have moved on to Snapchat. But there can still be pressure to keep up with the other services.

"There's all these new obligations to update and report and check in," she says. It can make dropping offline feel like a relief.

"If I get really busy, the first thing I stop doing is checking Twitter," she says. "I'm living my life. I'm not having a commentary about it."

Twitter prices IPO above range at $26

Microblogging site makes second largest Internet debut ever

Twitter on Wednesday priced its initial public offering at $26 a share, setting the stage for what’s expected to be the most closely watched IPO since Facebook’s rocky debut last year.

Twitter’s price makes its IPO worth $1.82 billion and marks the second biggest debut ever for an Internet company — even eclipsing the size of Google’s IPO in 2004. Twitter is expected to begin trading Thursday morning on the New York Stock Exchange under the ticker symbol “TWTR.”

The company had initially set a price range of $17 to $20 a share, which it raised this week to $23 to $25 amid strong demand for the IPO, even as some analysts cautioned against Facebook-style hype.

Twitter sold 70 million shares in the offering, or about 13% of its total shares outstanding. Facebook’s offering of more than 421 million shares represented about 20% of its shares outstanding. None of Twitter’s shares were being offered by shareholders.

The price of $26 gives Twitter a market cap of about $14 billion.

http://www.marketwatch.com/story/twi...?siteid=yhoof2