Twitter files to raise $1B, company is not profitable, will trade under ticker TWTR

Twitter had revenue of $253 million in the first six months of 2013 but it was not profitable, according to its S-1 prospectus, which was made public late Thursday. The company filed the official IPO documents several weeks ago under the new JOBS Act, which allows companies with revenue of less than $1 billion to keep their filing hidden from public view for at least three weeks.

The company said it plans to raise a maximum of $1 billion in the offering, but didn’t say which exchange it will be trading on. Twitter announced on September 12 that it had filed the S-1 with the SEC, but multiple reports said the filing was actually made much earlier, possibly as early as July. In a letter to shareholders, the company said:

“The mission we serve as Twitter, Inc. is to give everyone the power to create and share ideas and information instantly without barriers. Our business and revenue will always follow that mission in ways that improve–and do not detract from–a free and global conversation.”

According to the SEC filing, Twitter had $316 million in revenue last year or more than 10 times what it had in 2010. In the six months ended in June, it had revenue of $253 million, or more than twice what it had in the same period of 2012 — but it recorded a loss of $69 million. In 2012 it lost $49 million. The company said it had free cash flow (earnings before interest, taxes, depreciation and amortization) of $21 million in the first six months of this year.

Twitter s-1

Market value expected to be $15B plus

A number of observers speculated before the filing that Twitter could launch its public offering at between $28 and $30 a share, which would give the company a market value of more than $15 billion. Earlier this year, when Blackrock Ventures acquired shares from employees and early investors in a private transaction, the company was valued at about $9 billion — and in 2011, when Russian venture fund DST Global bought shares, it was valued at $8 billion.

An IPO is expected to make several early investors and insiders billionaires, including former CEO Evan Williams and venture investor Chris Sacca. Some early venture groups could also wind up with stakes worth $1 billion or more, including Union Square Ventures and Spark Capital. Twitter has raised a little over $1 billion so far, with some of that being sales by employees and early backers.

Twitter s-1 a

In the S-1, Twitter says $221 million of the total $253 million in revenue it brought in during the first half of this year came from advertising — the rest from data licensing. Earlier estimates from industry groups such as eMarketer had estimated that Twitter could make as much as $580 million this year from advertising, which is its main source of revenue. Under the “risk factors” category, Twitter said:

“To the extent our user growth rate slows, our success will become increasingly dependent on our ability to increase levels of user engagement and ad engagement on Twitter. If people do not perceive our products and services to be useful, reliable and trustworthy, we may not be able to attract users or increase the frequency of their engagement with our platform and the ads that we display.”


Over 215 million active users per month

The SEC document says that Twitter has 215 million active users per month, and that 75 percent of them access the service on a mobile device. The company had previously said that it has about 200 million users, although there were no details provided previously about the number of active users, as opposed to dormant accounts. According to the S-1 the service has 100 million daily active users.

Some have estimated that the number of fake or automated spam accounts could be as high as 10 percent of the overall number, but Twitter says it is actually 5 percent (although it admits this is an estimate based on a sample). Under risk factors, the S-1 says: “We anticipate that our user growth rate will slow over time as the size of our user base increases.”

Evan Williams

Evan Williams

According to the S-1 filing, co-founder Jack Dorsey owns just under 5 percent of the company, co-founder and former CEO Ev Williams owns 12 percent and current CEO Dick Costolo owns 1.6 percent. If the stock trades in the expected range of $28 to $30 per share, Williams’s stake would be worth approximately $1.7 billion and Dorsey’s would be worth $700 million.

More than the number of users, Twitter’s future rests on the amount of engagement it can show those users having with content from advertisers — and the data it can provide to those advertisers and partners such as TV networks. The company recently launched a feature called “Twitter Amplify” that allows it to target ads towards users who have been watching a specific TV show, and it has acquired a number of companies such as Bluefin that can crunch that data.

One of the big question marks for Twitter is how much bottom-line value that kind of relationship can actually produce, and whether Facebook — which has also been making a similar pitch to TV networks and advertisers about its value as a social-sharing pipeline — will be able to steal some of its thunder.

Post photo courtesy of Flickr user Samanta Warren