Twitter officially revealed this week that it is filing for an initial public offering, putting to rest the speculations. Of course as would be expected, it did so via a tweet. But other than the fact that the social network is going public, we don’t know much about it.
Bloomberg editors suggest that this isn’t such a good way for the company to start out its public venture, even though the law allows it to.
Twitter takes advantage of JOBS Act confidentiality
A DealBook post by Steven M Davidoff explains that the JOBS act of 2012 enables companies which want to file for an IPO to keep their financial information secret until just 21 days before they begin pitching investors—but only if they have less than $1 billion in annual revenue. This revenue level allows companies like Twitter to be classified as emerging growth companies.
It also makes it possible for the Securities and Exchange Commission to go over their financial information confidentially so that they can decide whether to move forward with the IPO or not—behind closed doors and without the scrutiny of the general public. Companies can also take care of problems with the SEC before their IPO and without anyone knowing about them.
Twitter tries to avoid other tech IPO blunders
As Bloomberg editors point out, the IPOs of Facebook Inc (NASDAQ:FB), Zynga Inc (NASDAQ:ZNGA) and Groupon Inc (NASDAQ:GRPN) were all big flops for different reasons. Twitter may end up being the most anticipated IPO since Facebook last year, so the company has good reasons for taking care of business behind closed doors.
But things may end up being a bit better for Twitter than they did for the other big tech IPOs we have had over the last few years. After all, the signs show that social networks are shifting to mobile, and Facebook Inc (NASDAQ:FB) appears to finally have made the transition to mobile. Twitter already does well in mobile.
So what kinds of problems might the SEC find with Twitter’s financial statements? We won’t know until closer to the IPO date, if it actually happens. Bloomberg editors say it “looks unseemly” for Twitter to manage its reputation using secrecy while it works with the SEC.