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San Francisco-based Twitter Inc. (NYSE: TWTR) has found a new home on Wall Street: the Big Board.
“We intend to list the common stock on the New York Stock Exchange under the symbol TWTR,” read Tuesday’s amendment to the company’s Form S-1 filing with the U.S. Securities and Exchange Commission.
Twitter’s roadshow to meet with potential investors will take place from Oct. 28 to Nov. 6. The stock is expected to price Nov. 14 and begin trading on Nov. 15, CNBC reported.
The Twitter IPO is one of the most hotly anticipated initial public offerings of 2013 – but the company faces a number of obstacles.
A big one is that it continues to lose money. Just-released financials from the first half of the year indicate Twitter likely won’t turn a profit in the second half, either.
Meanwhile, valuations for the company are running high, ranging from a lofty $12 billion up to a massive $25 billion.
That’s one of the reasons Money Morning Chief Investment Strategist Keith Fitz-Gerald won’t be investing in Twitter stock.
“That valuation is asinine for a company that hasn’t showed any profit potential,” Fitz-Gerald said. “Twitter Inc. may make a fine trading instrument, as long as the party continues. But as an investment? You can #countmeout.”
Among highlights of the amended Twitter IPO filing, and why we here at Money Morning remain skeptical:
- The eight-year-old company reported its third-quarter loss more than tripled to $64.6 million from the same quarter a year ago, up from $2.6 million.
- While revenue rose from $205 million to $422 million over the first nine months of 2013 from the same period a year ago, its net loss surged to $134 million, up from $71 million.
- Revenue in Q3 2013 rose to $168.6 million, up from $82.3 million a year earlier. Yet compared to the second quarter, the revenue growth rate was roughly the same 105%.
- The company continues to book big increases in research and development (R&D), sales, and marketing expenses.
- More than 70% of the company’s advertising revenue came from mobile in Q3, up from 65% in Q2. But it’s worth noting that mobile ads are cheaper. Research shows people are less likely to buy while web surfing on smartphones, and many advertisers have been slow to optimize their websites for smaller screens, making it harder to capitalize on mobile.
- Active monthly user count averaged 232 million in Q3, a 6% increase from Q2. However, that growth rate slowed from 7% in Q2 and 10% in Q1. That number remains a big concern among advertisers who say Twitter reach is too small. Facebook, by comparison, has more than 1.1 billion monthly users.
- Also of note, Twitter’s largest shareholder is private equity firm Rizvi Traverse Management LLC, with a 17.9% stake. JPMorgan Chase & Co. (NYSE: JPM) follows with 10.3%. Other major shareholders include Spark Capital, Benchmark Capital Partners, Union Square Ventures, and DST Global.
NYSE: TWTR a Big Win for the Big Board
While anyone investing in Twitter stock might not cash in, there is a winner in the hugely hyped Twitter IPO: the Big Board.
“This is a decisive win for the NYSE, and a continuation of our momentum in the technology sector. We look forward to joining Twitter on this landmark IPO,” NYSE’s head of listings Scott Cutler told The Wall Street Journal.
The NYSE, which agreed to be acquired by InterContinentalExchange (NYSE: ICE) in a near $10 billion deal last December that is expected to close Nov. 4, has long vied to attract more big tech companies. Microsoft Inc. (Nasdaq: MSFT), Apple Inc. (Nasdaq: AAPL), and Google Inc. (Nasdaq: GOOG) all trade on rival exchange the Nasdaq.
It’s not just a big blow to the Nasdaq; it also makes a clear statement that Twitter’s IPO will not be similar to Facebook Inc. (NYSE: FB) debut [which we detailed here: Twitter Stock IPO: Five Reasons It Won’t Be Like Facebook’s].
“This is a 180 (degree) turn from Facebook,” Pat Healy, chief executive of Issuer Advisory Group LLC, which advises companies on stock exchange issues, told The Journal. “It’s Twitter’s way of saying, ‘don’t paint me with the same brush.'”
The social media giant’s May 18, 2012, launch was overshadowed by technical glitches and trading problems that caused massive confusion. Legal actions followed and cost the Nasdaq millions in fines and settlements.
“All of us at Nasdaq wish Twitter well as they pursue their initial public offering,” an exchange spokesperson said in a statement.
Twitter’s IPO size, one-tenth of the enormous Facebook offering, also makes problems less likely to occur.
For Keith Fitz-Gerald’s complete analysis of why he won’t be investing in Twitter stock, read Twitter’s IPO: #Countmeout
- CNN Money: Twitter Picks the NYSE
- The Wall Street Journal: Twitter’s Loss Widens