SAN FRANCISCO — Twitter is so deeply ingrained in the cultural conversation that its initial public offering probably will be a hot topic on its trend-setting service for the next few months. Its stock market debut is also likely to be the most scrutinized coming-out party since Facebook went public in May 2012 and promptly flopped.
Facebook’s follies made an impression on its social networking rival. Here are four signs of the Facebook influence on Twitter:
Lesson 1: Take the road less traveled.
IPO submissions to the Securities and Exchange Commission typically include exhaustive financial information and other sensitive details. By taking advantage of the regulatory changes introduced since Facebook went public, Twitter is giving investors, the media, and would-be competitors less time to pore over its IPO documents.
Twitter gained the wiggle room under a law passed last year shortly before Facebook completed its IPO. Called Jumpstart Our Business Startups act, the law allows a company with revenue below $1 billion to file its IPO papers with the SEC confidentially. This allows the documents to remain secret until 21 days before the company starts marketing the deal to investors — a ritual known as a ‘‘road show.’’
By reducing the amount of time that its filing information is available for public review, Twitter is hoping to minimize the nitpicking over its business model.
Lesson 2: Work the numbers.
Twitter is going public as a younger and smaller company than Facebook Inc., making it easier for the firm to get the kind of robust growth in revenue that may excite investors.
Facebook had built such a large business by the time it went public that it was more difficult to speed its pace of growth from one quarter to the next. In its final year before going public, Facebook had annual revenue of $3.7 billion — about twice as much as Google did when it went public.
Research firm eMarketer estimates that Twitter had $288 million in revenue last year (the actual figure will be revealed in the company’s IPO documents).
Because it still has a relatively small financial base, it won’t be surprising to see Twitter’s revenue more than doubling from the previous year for several quarters after its stock starts trading, PrivCo analyst Sam Hamadeh predicted in a research note.
Lesson 3: Leave some money on the table.
Twitter won’t price its IPO as aggressively as Facebook did, says Hamadeh. That increases the chances of Twitter’s stock rising once it begins trading. He expects Twitter to set its IPO at a price that values the company at about $15 billion. That’s up from an estimated value of $10 billion, based on the money Twitter has raised from venture capitalists and other early investors.
Lesson 4: Timing is everything.
Many analysts thought Twitter might wait until next year to go public, but the stock market’s appetite for social media companies has never been hotter. With the company’s revenue growth picking up again, Facebook’s stock has surged by more than 60 percent in less than two months. Meanwhile, LinkedIn Corp.’s stock has more than doubled so far this year.
Things are going so well that even Facebook CEO Mark Zuckerberg has gotten over his one-time aversion to going public. In an about-face, Zuckerberg told a technology conference in San Francisco earlier this week that the IPO process turned Facebook into a better-run company.