SAN FRANCISCO -- Twitter's IPO filing Thursday prompted two reactions: "Wow" and "Why now?"
While the San Francisco micro-blogging site has been widely believed to be on the path to an initial public offering that would boost the Bay Area's broader tech economy, most pundits hadn't expected it to happen until 2014. Sitting on hundreds of millions of dollars in venture capital, Twitter's leaders repeatedly have insisted they're not focused on going public.
But with Wall Street fully recovered from an IPO lull that followed last year's botched Facebook debut, Silicon Valley's most anticipated stock offering since -- well, since Facebook's -- is officially in the pipeline.
"Why go public now? I'd say because it can," said Bill Tai, a venture capitalist with Charles River Ventures. His firm was among the first investors in Twitter.
The number of nationwide IPO filings through August was up more than 50 percent over last year, according to research firm Renaissance Capital. Wedbush Securities analyst Michael Pachter noted that Internet stocks such as LinkedIn and Pandora have seen their share prices soar in recent months.
Answers about the timing -- or anything else -- weren't forthcoming from Twitter. Not only is the company now under "quiet period" rules imposed by the Securities and Exchange Commission, but it chose to file under new SEC rules that permit many details to remain secret for now.
The company used its own Twitter account Thursday afternoon to announce it had filed the confidential IPO plan. A spokesman declined to comment on such details as how much money the company hopes to raise from investors or when the stock offering might take place.
But the fact that Twitter is using a confidential filing hints to one detail about its finances: The new SEC rules that permit such filings limit them to companies with less than $1 billion in annual revenue.
That's why Karsten Weide, who tracks online media for the IDC research firm, was among those surprised by the announcement. "Their ad business is growing quickly, but it's still very small," he said.
Research firm eMarketer projects Twitter will sell about $580 million of online advertising this year and could see its sales hit $1 billion in 2014.
On the other hand, eMarketer's $580 million estimate is more than double what it believes Twitter took in last year.
Twitter was founded in 2006 by young techies Jack Dorsey, Ev Williams and Biz Stone. It's grown to more than 200 million monthly users who share their thoughts in bursts of 140 characters or less. (Twitter's own announcement about the SEC filing weighed in at a svelte 135.)
The service's rapid growth has produced IPO buzz for years, but rival Facebook's rough Wall Street debut quieted much of the excitement. While the Menlo Park company's May 2012 IPO set records with a valuation that topped $100 billion, technical glitches with early trades and doubts about revenue growth helped drop Facebook's shares from an initial price of $38 to less than $20 over its first year of trading.
Facebook has rebounded of late, however, pushing to an all-time high of more than $45 Wednesday after the company's most recent earnings report showed strong revenue gains.
"If Facebook had hit an all-time low, you can bet they wouldn't be coming out now," Tai, the venture capitalist, said of Twitter.
The warm market conditions notwithstanding, recent hires indicate Twitter's IPO plans have been in the works a while. Last month, it added the former CEO of Ticketmaster to spearhead new e-commerce efforts, and it also reportedly hired a stock administration analyst who worked on Zynga's 2011 IPO.
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
Bloomberg News, citing an unnamed source, reported that Goldman Sachs would be the lead underwriter for the Twitter offering. Some observers said that would be a slap at rival investment bank Morgan Stanley, which led Facebook's IPO but was criticized for missteps that dampened its stock price.
"Twitter will learn from Facebook's flawed playbook," said Sam Hamadeh, CEO of financial analysis firm PrivCo. He said that while Facebook hurt itself by not going public until its revenue growth began to slow, "Twitter will IPO at just the right inflection point: While revenue grows in triple digits."
Hamadeh -- who describes himself as a confidant of Dorsey's -- also said Twitter plans to sell its shares on the New York Stock Exchange rather than the Nasdaq, whose technical snafus helped mar Facebook's opening day.
It may take months, however, for such details to be announced. The private IPO filing saves the company from having to reveal much of its financial information until just before its "roadshow" to institutional investors.
If Twitter's filing values the company at $15 billion, as Hamadeh predicts, it would represent a hefty uptick over the $8 billion Twitter reportedly was worth in April 2011, when it closed a massive $800 million funding deal led by Russian venture firm DST Global.
Tai -- who personally holds shares in Twitter by virtue of an angel investment in TweetDeck, which Twitter later acquired -- said someone recently offered to take them off his hands at a $13 billion valuation. He's standing pat.
Tai credited Twitter CEO Dick Costolo, a former Google executive who took the startup's reins in 2010 after infighting among the founders, for putting the company in position to make money from its giant user base. Costolo added resources to keep the crash-prone site afloat, and he's pushed to sell more advertising in the form of "sponsored" tweets from businesses and celebrities.
In the past year, Twitter has boosted revenue by opening its ad platform to outside developers and improving its ability to target ads to specific users. The company also forged partnerships with popular online sites like Pinterest and Spotify, as well as with television networks and advertising giant WPP.
Analysts say those moves show Twitter is serious about competing with Facebook and Google for advertising dollars.
Still, Pachter said the IPO is unlikely to inspire the same kind of frenzy that preceded Facebook's stock debut, since Twitter is a much smaller company.
Staff writer Jeremy C. Owens contributed to this report. Contact Peter Delevett at 408-271-3638. Follow him at Twitter.com/mercwiretap. Contact Brandon Bailey at 408-920-5022; follow him at Twitter.com/BrandonBailey.
A BRIEF TWITTER TIMELINE
March 2006: Twitter co-founder Jack Dorsey, working at a podcasting startup called Odeo, develops Twitter as an in-house messaging service. On March 21, Dorsey publishes the first tweet ever: "just setting up my twttr." Later in 2006, Odeo co-founder Evan Williams creates a new company called Obvious and buys Odeo and all of its assets -- including Twitter -- from investors.
July 2006: Twitter is launched to the general public.
April 2007: Twitter is spun off into its own company with Jack Dorsey as CEO, Evan Williams as chairman and Biz Stone as creative director.
March 2008: Twitter has 1.3 million registered users.
October 2008: Dorsey steps down as CEO and becomes chairman; co-founder Williams replaces Dorsey.
April 2010: Twitter has more than 100 million registered users.
October 2010: Williams steps down as CEO; Dick Costolo, formerly Twitter's chief operating officer, becomes CEO.
March 2011: Dorsey rejoins Twitter as executive chairman, focusing on product development.
February 2012: Twitter has 500 million registered users.
Source: Mercury News research
FIVE FACTS ABOUT TWITTER
1. The first tweet from outer space was made by NASA's T.J. Creamer on the International Space Station in January 2010, according to NASA.
2. Twitter users in the Japan time zone posted a record 33,388 tweets per second as the new year began on Jan. 1, 2013, according to the Huffington Post.
3. Twitter has been credited with playing a role in civil disobedience around the world and in pro-democracy protests in Egypt, Tunisia and Iran.
4. Justin Bieber has more Twitter followers than anyone else, with 44.1 million worldwide, according to Twitaholic.com
5. A promotional tweet from Oreo, showing a cookie photographed in the dark, was shared more than 15,000 times after a power outage hit the 2013 Super Bowl, according to the Associated Press.
Source: Mercury News reporting.
VC INVESTORS IN FOR BIG SCORE
Although it stands to raise hundreds of millions of dollars from its IPO, Twitter hasn't been hurting for cash, thanks to venture capital backers who could clean up themselves in the company's stock offering.
Source: Thomson Reuters; Crunchbase; Mercury News reporting