(MENAFN- Khaleej Times) Twitter, the business that thrives on a culture of excessive sharing, is taking a more discreet route to its initial public offering, adopting a strategy that others will follow.
The microblogging service sent out a 24-word tweet on September 12, announcing that it had confidentially filed to go public with the US Securities and Exchange Commission. It provided no financial details or time frame.
Twitter filed under the Jumpstart our Business Startups, or JOBS, Act signed last year. The legislation lets companies with less than $1 billion in annual revenue keep their most sensitive information away from the competition and the public until shortly before they promote the offering. Investors had better get used to the secrecy as a host of emerging technology companies, including Box, Airbnb, Square and Dropbox, are likely to take the same path.
"There's a lot of stress in preparing for an IPO," said Jeff Crowe, a partner at Norwest Venture Partners in Palo Alto, California, and director at RetailMeNot, which went public under the JOBS Act in July. "One stress you don't want to have is tipping off the competition any sooner than you have to about what your business model is like."
Under the rules for so-called emerging-growth companies, Twitter's review process with the SEC will be confidential until at least 21 days before the road show, where the company will pitch investors before setting a final price.
The JOBS Act was created to simplify the IPO process for smaller companies and make it less expensive to go public. Between audited financial statements and legal costs, companies spend on average $3.7 million for their IPOs in addition to underwriter fees, according to a report last year from PricewaterhouseCoopers.
Most businesses that can are taking advantage of the rule. Carter Mack, an investment banker who served on the task force that wrote the recommendations for the IPO portion of the act, estimates that more than 80 per cent of emerging-growth companies are filing confidentially.
"There's a big backlog," said Mack, president and co-founder of JMP Group in San Francisco. "Twitter filed because of that and because Internet stocks have done well recently."
Twitter is just small enough to qualify. The company's advertising revenue is projected to rise 63 per cent to $950 million next year from $582.8 million this year, according to EMarketer.
A group of companies with billion-dollar valuations on the private market will be watching closely. Box chief executive officer Aaron Levie said earlier this year that his business- software company will likely go public in 2014. Airbnb, operator of a home-rental website, was valued at $2.5 billion last year. Square, the payments startup run by Twitter co-founder Jack Dorsey, achieved a valuation of $3.25 billion a year ago after an investment from Starbucks Corporation, while document storage provider Dropbox was valued at $4 billion in a 2011 financing. ۬
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