Twitter lists 31 pages of IPO risks: Revenue concerns, security, and more

Image Credit: Illustration by Tom Cheredar

While Twitter’s letter to potential shareholders was pithy today, its list of potential IPO risk factors was not.

Twitter took 31 pages of its S-1 filing today to list out its stock’s potential risks — Facebook, on the other hand, spent just 20 pages on potential risks when it filed to go public. Twitter’s verbosity today could be a sign that it’s learned from Facebook’s troubled IPO, VentureBeat’s resident Twitter watchdog John Koetsier notes.

While Twitter listed the usual risks for similar tech IPOs — a chance that it may lose users, falling advertising rates may cut into revenue — I found the slightly more specific risks more telling.

For example, Twitter notes that it has has “incurred significant operating losses in the past, and we may not be able to achieve or subsequently maintain profitability.” It’s a section that seems particularly directed to Twitter’s revenue critics:

Since our inception, we have incurred significant operating losses, and, as of June 30, 2013, we had an accumulated deficit of $418.6 million. 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. We believe that our future revenue growth will depend on, among other factors, our ability to attract new users, increase user engagement and ad engagement, increase our brand awareness, compete effectively, maximize our sales efforts, demonstrate a positive return on investment for advertisers, successfully develop new products and services and expand internationally.

Twitter also points out that as its platform grows, security concerns could open it up to liability issues and a potential loss of faith from users and advertisers.

“Our products and services involve the storage and transmission of users’ and advertisers’ information, and security breaches expose us to a risk of loss of this information, litigation and potential liability,” the company wrote. “We experience cyber-attacks of varying degrees on a regular basis, and as a result, unauthorized parties have obtained, and may in the future obtain, access to our data or our users’ or advertisers’ data.”

Twitter is also well aware of what its unique position as a global communications platform means: It could face issues dealing with U.S. and foreign laws and regulations, something that could also affect user trust down the line.

Ultimately, it’s clear that Twitter wants investors to know exactly what they’re getting into. That’s in stark contrast to Facebook’s S-1 filing, which didn’t go into nearly as much detail (and also couldn’t include some of the shadier aspects of its IPO).


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