Well-known technology company Twitter is filing for a ‘secret IPO’ with hopes of attracting elite investors to the company. The California-based company is one of the Internet’s most popular services, but many doubt its potential as a business.
Heavily marketed as an open, transparent online messaging platform, Twitter is pursuing a ‘secret IPO’ – an unusual, confidential public offering that’s only made available to companies that generate less than $1 billion in annual revenue.
The secret IPO is made possibly under the Jobs Act, which includes a variety of special provisions for companies with limited revenue interested in accessing a large pool of public investors.
As part of the IPO process, Twitter will go on a ‘road show’ to attract mutual funds and major investors. The process is designed to assess interest in the company and price its stock – the more investors, the more expensive the shares will likely be.
Analysts believe that Twitter has chosen the private IPO route for two reasons. The first is to avoid the fanfare and hype that surrounded Facebook’s IPO. The second, many believe, is to minimise coverage of the service’s poor revenue figures.
Founded in 2006, Twitter is a seven-year-old social network with little in the way of profit. The company has received more than one billion dollars in venture financing and, so far, has failed to generate one billion dollars not in profit, but in revenue.
As an investment driven by the potential for profits and dividends, it’s far from the lucrative technology company that most are interested in. In fact, many see Twitter as an opportunity not for public investors, but for the company’s venture financiers.
Successful IPOs allow early investors to cash out, and Twitter’s lengthy list of early investors are certainly in the market for a return on their investment. With revenue minimal and profit potential limited, this IPO could be a major win for early Twitter investors, but a victory that comes at the expense of IPO investors.
