Twitter Favorites the Jobs Act, For Now

NEW YORK ( TheStreet) -- Twitter's tweet about its expected initial public offering shook up Twitter late Thursday afternoon.

But the company's 140-character admission of what many Silicon Valley VCs and the markets have been craving for months wasn't timed to coincide with Facebook's ( FB) resurgence in its stock, as some market pundits speculated.

It was likely timed to make the most of the Jobs Act, and to provide Twitter as much privacy and time as it needs pre-IPO. The Jobs Act only applies to companies with revenues under $1 billion.

Which means that Twitter, which several sources said would likely top the $1 billion revenue threshold by next year, wouldn't be able to take advantage of the new law.

Industry sources also previously told The Deal that the company's market capitalization is likely to be between $12 billion and $15 billion.

So far, Twitter's progression toward public markets appears to be taking lessons from its predecessors.

For years, the company fought to curtail unrestricted trading of its stock on secondary markets, like SharesPost and Secondmarket The startup did this by raising massive amounts of capital, some of it not actually used for operations, but for maintaining its capital structure.

It accomplished this through "Right of First Refusal" agreements that many of its investors -- but not all -- agreed to as part of its venture capital rounds. (Twitter's earliest VC rounds were not subject to these stipulations, which allowed for limited out-of-control secondary market trading.)

Facebook, which did next to nothing to curb secondary market trading of its stock, was helpless as its valuation grew like kudzu, and its bankers fueled the fire by jacking up its share price and float size during its road show. This was a significant factor leading to the company's poor performance in the initial months after its IPO.

After the IPO, Facebook underwhelmed with product announcements. Shareholders were left perplexed, and perhaps disappointed, when there was no new phone being developed by the social network -- after a flood of rumors.

With Twitter, sources say, this won't be the case. Other than ad revenue, industry insiders said they expect Twitter to add new verticals. Its hiring of former Ticketmaster Entertainment CEO Nathan Hubbard, for instance, is a sign that Twitter could get into live events ticket sales, putting them on a collision course with Live Nation and Eventbrite.

And it isn't just Facebook that served as a good, and bad, example for Twitter.

The public pain of Groupon ( GRPN)-- and the public ousting of CEO Andew Mason by his directors after more than a year of rudderless leadership -- is another example of what Dick Costolo and Twitter must want to avoid.

Groupon's many trip-ups as it went through the standard process of the IPO, pre-Jobs Act, were embarrassing to Mason and distracted from any positive hype the online coupon company could generate. Just like Facebook, Groupon's IPO underperformed out of the gate.

The micro-messaging startup's CEO famously fired his own board after two venture capitalists that backed Twitter, Union Square Ventures' Fred Wilson and Spark Capital's Bijan Sabet, decided to dump substantial amounts of their stock into secondary markets, at a valuation substantially lower than where Twitter is expected to IPO.

Costolo is notorious, but well-regarded, in Silicon Valley for his protectiveness of Twitter's private financial information -- even from his own investors.

However, Costolo's next act as CEO is what he will be judged for most, and remembered best. And unlike everything he's done to date, the startup's boss will have to work under the pressure of everyone knowing exactly how well his company is performing.

Goldman Sachs reportedly has been tapped to lead the IPO; other underwriters have yet to be revealed. --Written by Jonathan Marino in New York--

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