There have been rumors of an impending Twitter IPO this summer. Michael Arrington even grilled Mark Zuckerberg for advice he’d give the Twitter team when they went public. But up until today, Twitter remained coy.
Not any longer:
We’ve confidentially submitted an S-1 to the SEC for a planned IPO. This Tweet does not constitute an offer of any securities for sale.
— Twitter (@twitter) September 12, 2013
So what does that mean, exactly?
To walk you through the language, the SEC is the U.S. Securities and Exchange Commission and Twitter has filed the necessary forms to be considered public by the SEC – this means the investors are a’comin.
But that’s not what will happen with Twitter quite yet, because even though the company publicly tweeted about this step, what they’re doing is still considered a “secret” IPO. The “confidentially” in the company’s tweet means that Twitter has chosen to file a confidential S-1, so it doesn’t have to disclose certain information to the public at this time, like financial performance or potential market risks.
The idea of having a secret IPO is new — it only became an option in 2012, after the JOBS Act passed. It allows promising “emerging growth companies” to file confidential S-1 documents, which allows them to get the process started without having to reveal the entire financial assessment required in the S-1 to the public at the time of filing.
Why would Twitter do this? Often companies file a confidential IPO if they want to minimize scrutiny as they prepare and deal with an SEC review, but Twitter has chosen to tweet their decision out, so people are going to start scrutinizing them anyways. More likely, the company wants as much time as possible to boost its financial portfolio before the public gets to see it. The public will, of course, have access to its financial information before the offering actually occurs.
An interesting note: only companies that make under $1 billion in revenue have the option to file a confidential S-1, so we know Twitter can’t be generating more than that.