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Marketplace Whiteboard®

What’s confidential about Twitter’s IPO filing?

Paddy Hirsch Sep 12, 2013
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Twitter announced plans for an initial public offering today. In plain English, this means that it plans to sell a chunk of its shares to the general public. There are a number of reasons for doing this.

  • The company may need money. Like all growing companies, Twitter likely needs hard cash to spend on marketing, staff, facilities, maybe even acquisitions.
  • The company’s investors may want to get their money back. Investors in Silicon Valley and other parts of the world pumped more than a billion dollars into the startup since 2006 in the hopes that within a few years they’d be able to cash out  at a huge profit. Well, here we are, seven years later, and it’s probably time to make a withdrawal.
  • The company may already have so many investors that is HAS to go public. This is what happened to Facebook, which, once it had more than 500 investors, was required by law to go public. This doesn’t appear to be the situation with Twitter, however.

OK, so Twitter wants money. Fair enough. But what’s this “confidential” malarkey? Twitter has more than 23 million followers, and once it tweeted out the news about the IPO, a whole bunch more people knew about it (including all of Marketplace’s listeners this afternoon).

Turns out, it’s not the IPO the company wants to keep secret, it’s details about the way it does business. Twitter filed the IPO under the terms of a law passed last year, called the Jumpstart Our Business Startups (JOBS) Act. The act permits some companies to keep some information about their business and operations confidential, until the IPO gets closer to pricing.

IPO filings are usually followed by a series of updates to investors, as the company gets closer to the filing date. The updates include financial data and details about the terms of the share sale. But this kind of stealth filing, which is becoming increasingly popular, lets companies keep negative information, such as a poor quarter or a big loss, out of the public eye for longer.

In other words, Twitter is either keeping its powder dry, or it doesn’t want us to see just how damp it is.

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