Twitter filed an S-1 last week laying the groundwork for its initial public offering. The document was the first public filing to reveal financial information about the company including earnings and revenue data.
Although earlier versions of the S-1 have been published with the Securities and Exchange Commission, the information on those documents was not made public under a new legislation, which allows companies with revenue under $1 billion to keep their filings secret. The recent S-1 however, revealed some rather interesting information that may help investors decide if they want to buy the company’s shares.
The upcoming Twitter IPO has been compared with Facebook and its initial public offering. However, the two companies have glaring differences as illustrated in the chart below:
Twitter reported that revenue almost tripled to $316.9 million in 2012 and although it posted revenue of $253.6 million in the first half of 2013, it had a loss of $69.3 million. In fact, one of the more notable differences between Twitter and Facebook is the net income and valuation. Twitter reported a net loss and is estimated to be valued under $20 billion, whereas Facebook went public at a valuation of around $100 billion. Facebook of course was much larger during its IPO and hence it was valued higher.
Another key metric estimated in Twitter S-1s was the number of spam or false accounts created on the Social Media site. The company reported that although spam or false accounts have been a popular topic for discussion it only represents less than 5 percent of Twitter’s monthly users. The estimate according to Twitter, “…is based on an internal review of a sample of accounts and we [Twitter] apply significant judgment in making this determination.”
Advertising has been a key contributor to Twitter’s revenue, as it is estimated that more than 87 percent of its revenue came from advertising in the first half of 2013. The pricing for ads has gone down over the past few quarters, but in its first S-1 Twitter included a metric that showed how much advertising revenue it takes in based on user activity. The metric showed that US advertising generates $2.17 per “timeline view” and only 30 cents for the rest of the world.
The company also showed other data and even mentioned that President Obama used Twitter to declare victory in the 2012 election. If all further proceedings go smoothly, then Twitter could potentially begin trading as early as November but it has yet to announce which U.S. exchange it has chosen (NYSE or Nasdaq). The company will list common stock under the symbol “TWTR.”
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