Twitter IPO, In Under 140 Characters: Thank You #JobsAct
This could’ve been a social media reference to Twitter’s announcement on Thursday afternoon that it was filing confidential paperwork with the SEC to begin the process for its highly anticipated and widely speculated public offering.
The timing and secrecy surrounding Twitter’s announcement is widely believed to have been executed at this time in order to maximize the advantage offered by new regulations passed under 2012’s JOBS (Jumpstart Our Business Startups) Act, which for the first time allowed certain companies to initially file IPO paperwork confidentially with SEC regulators.
Stated clearly, the new regulations allow any “emerging growth company” which meet certain criteria, including revenues of less than $1 billion to use confidential filing and to qualify for less stringent disclosure requirements in areas such as executive compensation. Companies can also withdraw their filings confidentially if they don’t find the demand they expect.
Additionally, some speculate that another JOBS Act regulation, requiring a company to go public if it has more than 2,000 private investors, forced Twitter, like Facebook before it, to file the IPO.
Several sources have claimed that Twitter is expected to top the $1 billion revenue threshold by next year and that the new regulations keeps Twitter free from obligations of setting a timeline for selling its shares.
Prior to the changes, all companies would be forced to make a fully public filing, which would allow competitors and investors to shift through financial data and other inside information. Critics charge that this newly created “dark period” leaves small and medium sized investors in the dark while allowing the relatively few “institutional investors” an inclusive window into the pre-IPO period under the rules’ “test the waters” permission.
Supporters of the law, contend that the new rules protects these emerging businesses from needless scrutiny and allows them to set up their IPO in a private manner, giving them time to prepare for the three week period in which they actively shop the IPO to investors and price the deal, essentially, maximizing business activity which would be in accord with the JOBS’ Act’s mission, which was to spur corporate and economic growth.
The U.S. IPO market is on track to produce almost 200 debuts this year, the most since 2007. IPOs have also perfomed well this year climbing an average of 13.1% in the first day of trading.
1 Shira Ovide, Telis Demos, and Yoree Koh, Twitter Kicks Off Process for IPO, Wall Street J., Sept. 13, 2013, at A1, A6.
2 Heidi Moore, Twitter heads for stock market debut by filing for IPO (2013), The Guardian, available at http://www.theguardian.com/technology/2013/sep/12/twitter-ipo-stock-market-launch (last visited Sept. 13, 2013).
3 Mark Rogowsky, Twitter IPO: Why Filing in Secret Isn’t A Win, Forbes, available at http://www.forbes.com/sites/markrogowsky/2013/09/12/twitter-goingpublic-keepingsecrets-full-disclosure-in-the-jobs-act-era (last visited Sept. 13, 2013)