This week, Twitter CEO Dick Costolo gave an interview to the Los Angeles Times. One of the big questions: When will Twitter have its IPO? Well, Costolo’s answer wasn’t a surprise: There appears to be no urgency. It looks like Twitter may remain private for quite some time.
It certainly helps that the company has a “truckload of money in the bank” (in Costolo’s words).
While this is true, it’s also a bit of PR-speak. Just look at Facebook (NASDAQ:FB), which has over $10 billion in the bank. With it, the company is in an ideal position to pull off several mega-acquisitions. In today’s highly competitive tech world, this is critically important. But Twitter’s cash position is likely under $1 billion.
An IPO has other benefits as well. It’s a way to provide some liquidity for investors and employees. Shouldn’t they get rewarded for their efforts?
Another advantage is using the stock as currency for dealmaking. In a proposed acquisition, a target company would probably be more willing to take public stock versus private stock. This appears to be the case when Facebook bought Instagram. Yes, before agreeing to Facebook’s offer, it looks like the hot start-up said no to Twitter.
It’s true that Facebook has had a tough time as a public company. But lately the stock appears to be stabilizing, and the company is focusing on its business.
So, why does Costolo want to keep Twitter private? One reason is that it has no need to disclose financials or plans. It also has no worries about dealing with the quarterly whims of investors.
Yet these seem to be lame reasons. Actually, it’s probably a good bet that Costolo would take the company public, if he could. But with the tough market conditions, as well as the deterioration of social stocks like Zynga (NASDAQ:ZNGA) and Groupon (NASDAQ:GRPN), it’s probably not a viable option right now.
Tom Taulli runs the InvestorPlace blog IPO Playbook, a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of the upcoming book How to Create the Next Facebook: Seeing Your Startup Through, from Idea to IPO. Follow him on Twitter at @ttaulli or reach him via email. As of this writing, he did not own a position in any of the aforementioned securities.