Twitter's IPO risks include ads, users and financial losses
Social network cites about 55 risks to potential investors in Twitter IPO
Computerworld - As Twitter looks to convince investors its initial public offering (IPO) is a good bet, analysts are studying the biggest challenges facing the company, like finding a path to profitability while fending off rivals like Facebook and Google.
In an S-1 filing with the U.S. Securities and Exchange Commission, the company listed about 55 business risks that were explained over a number of pages.
The company cited a wide range of factors, including a history of financial losses, the difficult task of continuing to grow its user base, the possibility of alienating users with advertising, Internet blockages in foreign countries and the threat of earthquakes.
Analysts say Twitter's list of potential obstacles is quite thorough, though the caution isn't surprising considering the troubles faced by Facebook after its tumultuous IPO last year.
"It's not all that unusual for companies to list a huge number of risks that might put investor's investments in jeopardy," said Dan Olds, an analyst at Gabriel Consulting Group. "It's a sign of today's litigious times that firms need to cover themselves by disclosing each and every tiny risk the company might face."
At the head of Twitter's list of "what-ifs" is concern about the company failing to continue its user growth rates or seeing a drop in user engagement.
"Our financial performance has been and will continue to be significantly determined by our success in growing the number of users and increasing their overall level of engagement on our platform as well as the number of ad engagements," the company said in the S-1 filing. "We anticipate that our user growth rate will slow over time as the size of our user base increases."
Twitter also noted its financial record of steady losses as a risk for investors.
"Since our inception, we have incurred significant operating losses, and, as of June 30, 2013, we had an accumulated deficit of $418.6 million," the filing said. "Although our revenue has grown rapidly, increasing from $28.3 million in 2010 to $316.9 million in 2012, we expect that our revenue growth rate will slow in the future as a result of a variety of factors, including the gradual slow down in the growth rate of our user base."
Jeff Kagan, an independent analyst, said Wall Street and industry analysts will be scrutinizing the potential problems.
"Investors want to make money, period," Kagan said. "Investors aren't in it to send tweets. If they can't make money with Twitter, they'll invest in something else.
The first questions from investors is: "How long will it take Twitter to make money?" he added.
Kagan said that investors likely won't get the answer they want in this case.
- Twitter's slipping user growth spooks investors
- Get ready to tweet your questions for Twitter's first earnings call
- Super Bowl sets Twitter record, as Volkswagen launches social war room
- Perspective: Twitter's success opens up IPO pipeline
- Update: Twitter goes public at $45 a share
- With IPO cash influx, Twitter could be bigger threat to Facebook
- Ahead of IPO, Twitter shines up multimedia image
- Twitter kicks off pre-IPO investor roadshow
- As its IPO looms, Twitter faces investor grilling
- Twitter experiments with 'Event Parrot' -- a news delivery service
- 15 Non-Certified IT Skills Growing in Demand
- How 19 Tech Titans Target Healthcare
- Twitter Suffering From Growing Pains (and Facebook Comparisons)
- Agile Comes to Data Integration
- Slideshow: 7 security mistakes people make with their mobile device
- iOS vs. Android: Which is more secure?
- 11 sure signs you've been hacked
Changing the Way Government Works: Four Technology Trends that Drive Down Costs and Increase Productivity
This paper discusses four technology-based approaches to improving processes and increasing
productivity while driving down department and agency costs.
- Aberdeen Group: Marketing Analytics for Manufacturing: Forging Customer Insights There are no recalls for poor marketing. Manufacturers need to get their customer intelligence and messaging right the first time. Learn how.
- The Brave New World of Customer-Centric Manufacturing The Unique Opportunity for Manufacturers to Better Understand their Consumers
- See the Possibilities Utilizing Data Visualization Do you simply want to collect data, or do you want to derive business insights from it? What if you could quickly and...
- Meg Whitman presents Unlocking IT with Big Data During this Web Event you will hear Meg Whitman, President and CEO, HP discuss HAVEn - the #1 Big Data platform, as well...
- The New Way to Work Knowledge Vault This Knowledge Vault focuses on how, in today's increasingly virtual world, it's more important than ever to engage deeply with employees, suppliers, partners,... All IT Industry White Papers | Webcasts