That said, I
to Twitter on Oct. 8 after a four-month summer vacation, which speaks volumes of the potential utility I see in Twitter.
I have been off Twitter for almost four months. It should be obvious after a couple of tweets I posted yesterday that I have decided to return to Twitter on a limited basis. While I don't plan to post as frequently as I have in the past, I recognize (when conducted in a civil manner) that Twitter can be legitimate and value-added platform for instantaneously communicating to others. Frankly, if it is good enough for Warren Buffett, Carl Icahn and a number of other investment professionals that I respect -- it is good enough for me. So, I am back, and I am giving Twitter another whirl. In doing so, I plan to ignore (and block) the haters because haters are gonna hate.
-- Doug Kass, "Life Is Tweet Again" (Oct. 9)
The Twitter IPO
I have read
Twitter's 231-page offering document
Over the weekend,
The Wall Street Journal
published a column that describes some of
the company's most recent financings
In its latest valuation, Twitter valued the shares at $20.62 based on the secondary market transactions.
For discussion purposes, I am presuming that Twitter sells 80 million shares (including 10 million over allotment) at $22 a share -- the midpoint of the range is $18.50 a share. The pro forma equity capitalization will be about $12.25 billion at the IPO offering price, and approximately $1.75 billion of primary stock will be sold to investors. (Note: This is above the underwriters' initial estimates of $11.0 billion and $1.44 billion, respectively.) Officers, directors and 5% holders will own about 51.5% of the outstanding shares.
Twitter recorded only about $28 million in revenue in 2010. The company's top-line growth since then has been astonishing. Through the first nine months of 2013, Twitter's sales were $422 million (compared to $205 million a year earlier). Twitter will likely achieve sales in excess of $600 million for full year 2013.
Monthly active users rose by 39% (to 231 million) throughout the first nine months of the year.
Net losses totaled $133 million for the nine-month period ended Sept. 30, 2013, up from $70 million of losses a year earlier.
The company's accumulated deficit from inception is about $483 million, and losses are expected for the next few years.
As described in the company's prospectus:
Twitter is a global platform for public self-expression and conversation in real time. By developing a fundamentally new way for people to create, distribute and discover content, we have democratized content creation and distribution, enabling any voice to echo around the world instantly and unfiltered. Our platform is unique in its simplicity: Tweets are limited to 140 characters of text. This constraint makes it easy for anyone to quickly create, distribute and discover content that is consistent across our platform and optimized for mobile devices. As a result, Tweets drive a high velocity of information exchange that makes Twitter uniquely "live." We aim to become an indispensable daily companion to live human experiences. People are at the heart of Twitter. We have already achieved significant global scale, and we continue to grow. We have more than 230 million monthly active users, or MAUs, and more than 100 million daily active users, spanning nearly every country. Our users include millions of people from around the world, as well as influential individuals and organizations, such as world leaders, government officials, celebrities, athletes, journalists, sports teams, media outlets and brands. Our users create approximately 500 million Tweets every day. Twitter is a public, real-time platform where any user can create a Tweet and any user can follow other users. We do not impose restrictions on whom a user can follow, which greatly enhances the breadth and depth of available content and allows users to discover the content they care about most. Additionally, users can be followed by thousands or millions of other users without requiring a reciprocal relationship, enhancing the ability of our users to reach a broad audience. The public nature of our platform allows us and others to extend the reach of Twitter content beyond our properties. Media outlets distribute Tweets beyond our properties to complement their content by making it more timely, relevant and comprehensive. Tweets have appeared on over one million third-party websites, and in the third quarter of 2013 there were approximately 48 billion online impressions of Tweets off of our properties. Twitter provides a compelling and efficient way for people to stay informed about their interests, discover what is happening in their world right now and interact directly with each other. We enable the timely creation and distribution of ideas and information among people and organizations at a local and global scale. Our platform allows users to browse through Tweets quickly and explore content more deeply through links, photos, media and other applications that can be attached to each Tweet. As a result, when events happen in the world, whether planned, like sporting events and television shows, or unplanned, like natural disasters and political revolutions, the digital experience of those events happens in real time on Twitter. People can communicate with each other during these events as they occur, creating powerful shared experiences.
Establishing Street Cred
Before discussing Twitter's merits, I feel I must emphasis that it is not in my DNA to normally be excited about the share price prospects of a company that is operating at a loss, that will be in the red for several more years and that has a share price that is not valued on fundamentals.
From the early going, I have been a consistent skeptic of the Internet (when it was proven to be appropriate back in the last tech/Internet bubble during the late 1990s).