Here’s another figure: Twitter’s accumulated deficit to date is $418.6 million, a figure that will race to $748.2 million once it goes public and realizes $329.6 million in costs related to stock-based compensation expenses.
This is not to say that Twitter has spent $418.6 million to date; that figure is far higher. Accumulated deficit can be viewed as the company’s net income, net loss and paid dividends added together as debits and credits. So the formula is net income, minus net loss, minus paid dividends. Twitter pays no dividends, so its accumulated deficit is simply the amount of money that it has spent more than it has brought in as revenue in its life.
In a simple way, it’s the money that Twitter had to raise to keep its lights on during its growth. The company continues to lose money on a GAAP basis, and even on an adjusted net loss scale. So we can expect that Twitter’s accumulated deficit will increase in time. The company doesn’t appear to be operating in a way that would place it on a quick ramp to profitability, its loss rising year over year when the first half of 2013 is compared to the similar period in 2012.
Twitter is not alone in having a large accumulated deficit. In 2005, for example, Amazon reported a $2.2 billion accumulated loss. That was a full decade after its birth and eight years after its initial public offering. Trulia, by way of another comparison, had an accumulated deficit of $44 million before it went public.
If Twitter raised more than $1 billion, but has an accumulated deficit of just $418.6 million, where did the rest of the money go? It still has quite a lot of it left, with cash on hand of $164.5 million and short-term investments of $210.5 million. Twitter is about to become far more cash rich, following its offering, but not profitable.
Top Image Credit: Emmanuel Huybrechts