Breath of fresh air? New blood? Call it what you want, but the just-announced Twitter IPO is exactly what the stale environment in tech offerings needed.
It’s been a while since we’ve seen a red-hot tech company go public. The last technology IPO to truly get investors jazzed came from Facebook (FB), which was well more than a year ago — May 2012 — and it left investors crestfallen until only recently.
But with one tweet, Twitter should get things bubbling up again:
“We’ve confidentially submitted an S-1 to the SEC for a planned IPO. This Tweet does not constitute an offer of any securities for sale.”
That was Twitter’s way of announcing that it had confidentially filed an S-1 with the SEC, which means we won’t actually be able to see the S-1 for a few months.
Not to worry. There’s plenty to talk about in the meantime.
For one, the Twitter IPO has the potential to be the largest U.S. offering of the year. A Sunday Times report estimated a $15 billion valuation for a Twitter offering. Assuming an IPO typically raises somewhere between 10% to 20% of its valuation, the Twitter IPO could raise $1.5 billion to $3 billion — likely over ING U.S. (VOYA, $1.27 billion) and possibly trumping the Pfizer (PFE) spinoff of Zoetis (ZTS, $2.24 billion).
Twitter also fills out a lot of the checkmarks you’d want to see when looking at an IPO. It has a global brand, it is a mobile-first company, and it is growing wicked fast. According to eMarketer, the company posted revenues of $350 million last year and is expected to hit $1 billion by 2014.
That’s all the more impressive when you consider CEO Dick Costolo’s thoughts on revenue — a couple months ago, he was quoted as saying, “We think of revenue like oxygen. Essential to life but not the first thing you think about in the morning.”
So it should be scary to think what he could accomplish now that he’s actively looking for more. Just a couple days ago, Costolo began to address boosting revenues by shelling out $350 million for MoPub — the operator of a top mobile ad network that allows for real-time bidding on ads, which should boost Twitter’s top line.
While we won’t have access to the S-1 for a couple of months, one thing you can bank on is heavy use of the word “mobile.” The mobile market is on the verge of explosive growth — a report from eMarketer forecasts that mobile ad spending will spike by 95% this year, reaching $8.51 billion annually. By 2017, the prediction is that the market will hit $13.09 billion.
Speaking of Facebook, Marcus Nelson — the CEO and founder of Addvocate, a company that makes corporate social media tools — thinks the competitors’ fates are tied. He had this to say about the Twitter IPO:
“The fact that Twitter can announce its IPO filing on its own platform is a testament to its maturity as a company and its ability to leverage itself as a medium for real-time news. Twitter — and the financial markets — are ready. The continued ascent of Facebook in the eyes of the market will play a pivotal role in the timing of how this unfolds. As long as Facebook sustains its growth and numbers, Twitter will arise as the beneficiary.”
The Twitter offering could come as early as November, though given the time it has taken other major deals to get off the ground (such as Facebook, which took more than three months), it could be February before we see a Twitter IPO.
I’ll be on Fox Business News tomorrow after the market closes to further discuss the Twitter IPO.
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.