Twitter files for $1 billion IPO, revealing ambitious spending in pursuit of fast growth

Twitter unveiled the plans for its long-anticipated public offering on Thursday, revealing the inner workings of a company that is devoting considerable resources to keep up its breakneck growth.

Under the ticket symbol TWTR, the social network said it will seek to raise $1 billion by selling stock to the public, though that figure is likely to change as the offering date gets closer. The documents, initially filed in secret with securities regulators, also reveal a company that is experiencing decent growth — it reached 218.3 million monthly average users in June, a 44 percent increase from the same point in the previous year, while its revenue nearly tripled, to $316 million, in 2012.

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But it also publicly lays bare for the first time a company that is spending huge and increasing amounts of money to grow as quickly as possible. Twitter’s spending on items such marketing tripled last year, contributing to a $79 million loss.

Still, the fast growth rate is expected to attract heavy interest as it heads out onto a road show to convince investors to buy shares. Nearly every big name on Wall Street from Goldman Sachs to Morgan Stanley vied to take part in the event.

The company promoted its connection to some of country’s biggest news events in the filing, noting that President Obama used the platform to declare victory during the 2012 election and that one user in Pakistan unknowingly chronicled the raid on Osama Bin Laden’s compound on Twitter.

“We are inspired by how Twitter has been used around the world,” the company said in its filing. “Twitter brings people together in shared experiences, allowing them to discover and consume content and just as easily add their own voice in the moment.”

Its ubiquitous status in American culture aside, the firm has a limited user base and worries that it may be unable to retain those users, particularly the high-impact celebrities and politicians whom it has courted aggressively, according to the filing.

It also noted that “hostile or inappropriate usage” of its platform could have a negative effect on its business. High-profile Twitter accounts have been the subject of embarrassing hacks in recent months.

In April, a single, erroneous tweet appearing to emanate from the Associated Press led to a dramatic drop in stock prices. The tweet’s report of explosions at the White House was quickly corrected, but only after the Dow Jones industrial average dropped about 1 percent. Hackers calling themselves the Syrian Electronic Army asserted responsibility for the tweet.

In February, hackers took control of the Burger King account, replacing its logo with the golden arches of rival McDonald’s.

Most of the company’s revenue, 87 percent, is generated from advertising, but its early efforts have not been enough to make the company profitable.

“Twitter has to determine how it’s going to translate its healthy user base numbers to where marketers actually want to spend real and substantial money on the platform to engage in real conversation with those users,” said Zachary Reiss-Davis, an analyst for Forrester Research.

Reiss-Davis said that the company has begun launching more mature advertising products in the United States. “For Twitter, the question is going to be how do marketers use those products to contribute real business value for them,” he said.

While Twitter’s international business is small compared with its domestic sales, its overseas business is growing rapidly. Sales abroad jumped nearly twelvefold between 2011 and 2012, to $53 million. The company says it expects its business to grow especially fast in places such as Argentina, France, Japan, Russia, Saudi Arabia and South Africa. The prospectus notes that there are challenges in some markets, such as China, where the government blocks access to the service.

Companies do not have to disclose what amount they actually pay the federal government each year in income taxes. But the best approximation, known as current federal taxes, was zero for Twitter the past three years. The company also apparently files taxes in Ireland, citing the country as one of the three jurisdictions where it’s mostly likely to get examined by tax authorities. Ireland is a popular spot for tech companies to hoard cash since the country’s corporate rate is lower than the United States; this practice by Apple and others has been criticized by some on Capitol Hill.

Twitter initially submitted its prospectus to the Securities and Exchange Commission in secret under a special federal law for “emerging growth companies.” Under the law, known as the JOBS Act, Twitter did not have to disclose its financial data until at least three weeks before it starts to market itself to investors.

(Jeffrey P. Bezos, the owner of The Washington Post, was an early investor in Twitter.)

Dina ElBoghdady and Jia Lynn Yang contributed to this report.

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