Earlier this week, Twitter submitted an S-1 to the U.S. Securities and Exchange Commission for a planned initial public offering. When Twitter sent out a tweet to announce their plans for the IPO, the social media world exploded. The Internet did not handle the news well.
With Facebook’s IPO in 2012, there were a lot of hiccups. News of its lower earnings were all over the Internet before its IPO; the hype built around Facebook had caused an overvaluation of the company by more than $50 billion. Facebook’s share prices and IPO value fell almost immediately after Facebook went public. It took more than a year for Facebook shares to return to its IPO value. Due to Facebook’s rocky debut, investors and the public are not optimistic about Twitter’s IPO filing.
Transparency is also a big issue in major IPOs. Twitter has delayed releasing its finances and this “is not good, considering that social media is all about openness and transparency,” reported Trip Chowdhry at Global Equities Research. “If your culture is based on openness, shouldn’t your IPO be based on that?”
After Twitter broke the news, USA Today published an article headlined “140 reasons to worry about Twitter’s IPO.” Author John Shinal mentioned that Twitter’s “use of a new type of confidential filing to test the IPO waters” has resulted “in less transparency for retail investors.”
From a PR practitioner’s point of view, Twitter has to differentiate itself from Facebook’s IPO. Twitter needs to avoid creating the hype that surrounded Facebook during its IPO, which caused an over-inflated valuation. It needs to prove to investors and the public that executives have everything under control and avoid undue public scrutiny.
Although there were many negative comments about Twitter’s IPO, PRDaily commended Twitter on how it handled its IPO announcement. In PRDaily’s article, practitioners and social media gurus “praised the company’s decision to use its own communication platform to announce its plans.” Facebook on the other hand, did not make use of its own platform to announce its IPO last year, allowing Twitter to steal their limelight.
Now, only time will prove if Twitter will lead a successful IPO.
Do you think Twitter is ready for an IPO? What are some PR strategies Twitter can use to avoid the comparison to Facebook? Are social media companies all heading in the same direction? How would Twitter’s IPO affect users and also PR practitioners /journalists who use the platform?