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This past Thursday, Twitter announced (through a tweet, of course!) that it has initiated the process for an initial public offering. In the past few days, there has been much speculation about the potential effects of Twitter’s I.P.O.
Some articles, including one in the New York Times, express the hope that “Twitter’s coming stock sale will help the once-soaring technology sector take flight again.”
The technology sector has taken a hit in recent years. According to the same article, so far only 17% of this year’s I.P.O.s have related to technology, the lowest rate since 2008. Additionally, Facebook’s I.P.O. in 2011 caused problems. According to the article, Facebook’s I.P.O. was “botched” and “marred by technical errors that dented the overall market for I.P.O.’s for weeks.” Some commentators hope that Twitter’s I.P.O. will help technology I.P.O.s rebound. It is estimated that Twitter is worth at least $10 billion and could “raise hundreds of millions of dollars.” If these estimates are correct, Twitter’s I.P.O. will be the “biggest technology I.P.O. since Facebook.”
However, other commentators are concerned about the potential effects of Twitter’s I.P.O. Twitter decided to use the Jumpstart Our Business Startups Act (“JOBS Act”) to initiate the process. A different New York Times article describes the JOBS Act as follows: the Act permits “a company with less than $1 billion in annual revenue to keep its financial data secret until it actively begins marketing its stock.” This means Twitter does not currently have to disclose financial information, and potential investors are not able to review this information. Some commentators find this very concerning. For example, according to Steven Davidoff, “Among the concerns that opponents of the law had was exactly the kind of situation that is now going on with Twitter: a prominent company, known around the world, has filed for what will most likely be the most anticipated stock offering since Facebook – and we know precious little about its business.” Additionally, a blog post by Teresa Tritch cites concerns for investor interests, which she claims take a backseat to the company’s interests under the JOBS Act. According to Tritch, “in markets, transparency is better than secrecy, disclosure is better than withholding, timeliness is better than delay, and trust is better with verification.”
Will Twitter’s I.P.O. bring a much-needed spark to technology I.P.O.s? Will potential investors’ lack of information have negative consequences?
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