In the near future, anyone with an Internet connection and some lunch money will be able to invest in one of Silicon Valley’s hottest tech companies. But after big brother Facebook’s IPO debacle, should America’s armchair investors pin their hopes and dreams on Silicon Valley’s younger sibling? We help you compare in one easy chart.
The difference between the two is Twitter’s glaring negative sign on its net income. That’s right — Twitter is losing money, where at least Facebook was turning a profit at their IPO.
Other than the sheer size of Facebook’s user base, the companies are wildly divergent: Facebook went public at a valuation in and around $100 billion, and Twitter is expected to price its shares at a level that will value it at under $20 billion.
Facebook, quite simply, was much larger at the time of its IPO. In fact, looking at Twitter’s filing documents, you almost wonder why it is going public now. It has ample cash reserves but accelerating losses, as it invests in its research and development budget and builds out its sales team.
The reason, we think, is that investor pressure has built to the point that Twitter needed a large liquidity event to break free from some of its oldest invested capital. For a company of its scale, there were only two options: sell or IPO. And for Twitter, that meant it only had one option. Hence its S-1. We do not say all that to indicate that Twitter is not a valuable, interesting company. It is both. But the bent of its filing docs feels more like a company heading toward an offering and not the numbers of a firm ready to enact one.
Notes: Twitter’s full-year data is 2012. Facebook’s full-year data is 2011. Facebook two-quarter revenue figure is not listed in its S-1, and so was calculated by deducting its third-quarter 2012 revenue from its nine-month tally that was provided in that release. The initial Facebook S-1 had a lower monthly active user count, but the quoted figure is the number listed in its amended S-1.