Twitter has taken a decidedly cautious and conservative approach in the months leading up to its long-expected initial public offering.
From what we’ve seen so far, Twitter’s mantra is “don’t do what Facebook did.” As the Wall Street Journal reported, Twitter executives are hoping to avert the pitfalls of its larger rival.
The company finally released its S-1 IPO documentation this afternoon, which shows some clear differences to Facebook. For one thing, it is a far smaller company hitting the public markets. As MIT’s Technology Review points out, Twitter has 215 million monthly active users. But when Facebook was eight years old, as Twitter is now, it had over 600 million users.
The way that Twitter has approached its IPO is also markedly different to Facebook. While Facebook generated a great deal of hype, Twitter employees and executives have done a far better job at staying tight-lipped. The company filed confidential papers with the Securities and Exchange Commission to begin the IPO process, which surprised many analysts and industry insiders.
Shortly after the news broke, I caught up with Byron Deeter of Silicon Valley venture firm Bessemer Venture Partners for some insight into Twitter’s carefully-considered IPO strategy. Deeter tracks dozens of companies that are nearing an exit, and has a great deal to say about best practices.
In his view, Twitter’s strategy closely resembles another social networking player, LinkedIn, which went public in May of 2011. Like Twitter, LinkedIn was a far smaller company than Facebook when it filed for its IPO, but it nearly doubled its stock price on the first day of trading. Its performance and growth have stayed fairly consistent since then.
By contrast, Facebook experienced a near-immediate post-IPO stock plummet. ”Facebook was under intense scrutiny — they raised a lot of capital for very little dilution,” said Deeter.
Given that Facebook has succeeded in growing its revenues and user-base, Deeter believes that the company didn’t deserve all the criticism it received from the press. “It was a busted process but not the disaster that everyone held it out to be.”
However, he would still advise Twitter to avoid the public scrutiny in the short-term by pricing its stock conservatively. ”It’s always better to price a bit too low,” he said. “Facebook pushed for the extra dollar.”
Another prediction? Deeter believes that Twitter, or TWTR, will list its stock on the New York Stock Exchange (NYSE). Facebook listed on NASDAQ, but technical glitches threw the opening into chaos.
At this stage, investors seem fairly confident that Twitter can continue to grow its revenues, and execute on its international expansion plans. The company hasn’t turned a profit yet — so only time will tell whether it will be a strong and consistent performer on the public markets.