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October 15, 2013 11:22 pm

Twitter losses widen ahead of IPO

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A user scrolls through a Twitter feed on the screen of an Apple Inc. iPhone 5 smartphone©Bloomberg

Twitter revealed its losses had widened in the third quarter in an updated filing for its $1bn initial public offering, which it said would take place on the New York Stock Exchange.

The decision to choose NYSE dealt a blow to rival Nasdaq, which had hoped to claim the social media company listing as it recovers from its botched debut of Facebook last year. It will make Twitter the largest consumer internet IPO to take place on NYSE, which has steadily grown its share of technology listings and now challenges Nasdaq in attracting the business of start-ups.

Twitter also provided updated numbers for the first nine months of the year. It said total revenues rose 106 per cent to $422.2m, from the same period the previous year. But net losses also widened significantly to $133.8m from $70.7m a year earlier.

The number of monthly users rose from 218m in June to 232m in September, for a rise of 39 per cent year-on-year.

The portion of revenue that Twitter generated from mobile devices rose to 70 per cent in the third quarter, from 65 per cent in the previous quarter.

For a company dependent on internet advertising such as Twitter, mobile presents opportunities as a faster-growing platform than desktop PCs, and challenges, in the limit of advertisers’ spending and the number of ads that can be shown. Some 76 per cent of Twitter’s users accessed the service from a smartphone or tablet in the most recent quarter, up from 69 per cent a year ago.

Twitter was still hiring at a rapid clip, with an 87 per cent rise in staff over the year to 2,300 full-time employees.

Certain changes to Twitter’s product, which over the period have included a new way to display conversations between a group of people that a user follows, caused a 1 per cent decrease in the number of times a user loaded their feed during the quarter. This is an important detail as Twitter limits the amount of advertising it shows in a single “timeline view”.

However, the change did not affect growth in Twitter’s advertising yields. Advertising revenue per timeline view, the metric which the company says it watches most closely as an indicator of business performance, increased in the US to $2.58 in the third quarter from $2.17 in the previous quarter, and rose from 30c to 36c in the rest of the world, where Twitter’s ad business is less developed.

The decision by Twitter to list on NYSE came in spite of an appearance by Nasdaq executives including chief executive Robert Greifeld at the company’s San Francisco offices earlier this month, fuelling speculation that the exchange was making a last-ditch effort to win the offering.

NYSE said in a statement: “This is a decisive win for the NYSE. We are grateful for Twitter’s confidence in our platform and look forward to partnering with them.” Nasdaq said it wished Twitter well as it pursued its IPO.

Rich Repetto, exchange analyst at Sandler O’Neill, said: “This event is more about branding than revenue, since that is minimal. But this is a high-profile technology name.”

Through the first dotcom boom Nasdaq was the dominant venue for most technology and internet listings but NYSE has closed that gap in recent years, gaining the business of LinkedIn, Yelp and Pandora.

The bungled Facebook offering on Nasdaq last May and more recent mishaps have led some investors to question the exchange’s technology-savvy venue


Twitter Rich List


The latest Twitter filing details the holdings of Twitter’s largest shareholders. Four investors stand to make more than $1bn from their Twitter shares, based on a valuation of between $12bn-$15bn, but only one, Evan Williams, is a co-founder.

The largest shareholder is not one of the three founders but entities affiliated with Rivzi Traverse, an investment group with a 17.5 per cent stake which could be worth between $2.1bn to $2.7bn. Suhail Rivzi, the head of the group, is also an investor in Twitter co-founder Jack Dorsey’s other company, Square, and Flipboard, the news reader application.

JPMorgan is the next largest outside shareholder in Twitter, holding more than 10 per cent of the messaging platform through various entities, a stake worth between $1.2bn-$1.5bn.

The venture capital firms which backed Twitter when it was a start-up are the next largest shareholders, with Spark Capital owning a stake which could be worth $820m-$1bn and Benchmark Capital holding shares worth an estimated $790m-$990m.

Its executive officers and directors own more than a quarter of Twitter, with stakes which could be worth a total of $3.1bn-$3.8bn on listing.


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