Friday, October 4, 2013

In the first half of 2013, Twitter posted revenue of $253.6 million but had a loss of $69.3 million. The losses are a non-issue. It would have been a surprise if they had a profit.

Brian Wieser

Said Brian Wieser, analyst at Pivotal Research Group -  a New York City based registered investment advisory firm - in a statement quoted by Reuters in its news report today under the title "Twitter reveals rip-roaring growth, big losses ahead of IPO." Further, commenting on the H1 results of Twitter, he said : "Here's the number that really matters. It's the revenue per customer. The question is how much is the typical commitment they're getting from advertisers at this time," Reuters reported.

Twitter filed the required document with the US Securities and Exchange Commission on October 3, 2013 for its $ 1 billion IPO. The company has expressed its intention to list the common stock under the symbol "TWTR." Twitter, in its SEC filing says : "We have more than 215 million monthly active users, or MAUs, and more than 100 million daily active users, spanning nearly every country. Our users include millions of people from around the world, as well as influential individuals and organizations, such as world leaders, government officials, celebrities, athletes, journalists, sports teams, media outlets and brands. Our users create approximately 500 million Tweets every day.

(Photo source : Twitter)
When President Barack Obama (@barackobama) won the 2012 U.S. presidential election, he first declared victory publicly not on television or other public media, but on Twitter. The President's Tweet was viewed approximately 25 million times on Twitter and widely distributed offline in print and broadcast media.

Twitter has revealed that from 2011 to 2012, its revenue increased by 198% to $316.9 million, net loss decreased by 38% to $79.4 million and Adjusted EBITDA increased by 149% to $21.2 million. From the six months ended June 30, 2012 to the six months ended June 30, 2013, revenue increased by 107% to $253.6 million, net loss increased by 41% to $69.3 million and Adjusted EBITDA increased by $20.7 million to $21.4 million. 

The Twitter's SEC filing mentions numerous risks and uncertainties associated with their business. It says : "We generate the substantial majority of our revenue from advertising, and the loss of advertising revenue could harm our business. If we fail to grow our user base, or if user engagement or the number of paid engagements with our pay-for-performance Promoted Products, which we refer to as ad engagements, on our platform decline, our revenue, business and operating results may be harmed." The company also anticipates substantial expenditure arising from the tax liabilities it undertakes initial settlement of restricted stock units, or RSUs.

As per the company's valuation of August 5, 2013, the fair value of Twitter's common stock was $20.62 per share and based on this, RSUs granted through September 5, 2013 were also valued at $20.62 per share. The third-party valuation of Twitter's common stock undertaken first time on November 18, 2011, was $13.05 per share based on which the fair value of RSUs granted through March 9, 2012 was determined to be $13.05 per share. However, a non-marketability discount of 15% was applied. Since July 1, 2010, Twitter has granted options to purchase an aggregate of 32,651,260 common stock shares - under equity compensation plans - to company's directors, officers, employees, consultants and other service providers at exercise prices ranging from approximately $0.05 to $14.42 per share.

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