Looking to avoid the near-disaster of the Facebook tech IPO of 2012, Twitter has begun the process of carefully structuring its first public stock offering. Caution seems to be the watchword for Twitter, which has done everything in its power to put together Wall Street's next tech IPO. The offering has been months in the making, with consultants aplenty and armies of lawyers passing documentation back and forth with the SEC. The idea seems to be that the elaborate choreography of the event will ensure a smooth transition from a privately held company to a publicly traded tech giant. There are certain quirks to this offering, however, and they could be important.
It was all a big secret, for one thing. While the news of the IPO officially broke when the company tweeted the news on September 12, it was soon revealed that the initial S1 filing had been made as early as July. This kind of secret filing is legal under one of the more controversial provisions of the JOBS act. The purpose behind a secret filing is mainly to avoid all manner of messy disclosures that might get in the way of a clean public image. With a covert filing, a company can exchange paperwork with the SEC several times to ensure an uncomplicated—and almost information free—filing. The provision applies to companies with an expected net worth of less than $1 billion, which brings up another interesting discontinuity in the process.
Twitter has reported that it expects to draw something on the order of $1.5 billion with its first day of trading. How, exactly, the extra half-billion dollars got into the SEC confidential process without disqualifying Twitter from the JOBS act provisions is an open question. While it would be nice to hear an answer, the process is secret—right down to profit/loss statements.
None of which might matter, as the initial buzz—all of which might be part of a carefully crafted marketing campaign by the communications department, remember—is that the current crop of private Twitter investors aren't interested in selling their shares on the open market. Rather, so goes the rumor, they might take advantage of open trading to buy more stock in Twitter, which might be good news for them but would have the effect of further reducing the initial trading volume.
Twitter was a risky venture when it started. Nobody had any idea whether the microblogging company was even offering a product that would interest consumers. Add to that the generally sloppy way Twitter handled security issues and customer feedback for the first few years, and you have a somewhat unpromising start. Twitter has undergone significant changes in recent years, however, and seems to be managing the minuet with the SEC quite well so far. What kind of a day Twitter will have when the opening bell rings remains an open question.
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