Why the Twitter IPO is Big News in Tech
26 September, 2013
Traders everywhere watched as Twitter filed for the confidential initial public offering of stocks at the Securities and Exchange Commission two weeks ago. Since then, the Internet has been abuzz with speculation on what the Twitter IPO will do for the popular social media platform, valued at roughly $10 billion. By going public, Twitter hopes to generate the money it needs to grow without a major leadership overhaul. Now is an exciting time Twitter stakeholders, but what about the rest of the tech world?
If the recent first-day IPO successes of FireEye and Rocket Fuel are any indication, 2013 is a good year for tech companies to go public. The numbers back this up, with PwC’s Global Technology IPO Review reporting a surge in tech IPO activity in the second quarter of 2013. As many as 12 U.S.-based tech companies went public in Q2 alone. Other tech hopefuls lined up for an IPO in the coming months include cloud computing service provider Covisint, French advertising startup Criteo, analytics software vendor Tableau, and Chegg, a start-up that rents scholastic materials to high school and college students.
The push to go public has been observed across several tech industry sectors, including communications, social media, enterprise software, and advertising technology. This upward trend may be attributed in part to the fact that the stock market has of late proven particularly kind to the tech industry, as can be seen in Facebook’s dramatic comeback from last year’s IPO fiasco. LinkedIn, another social media giant notable for its standout performance since its record-breaking market debut back in 2011, has also been a consistent power player.
Strong stock market aside, tech IPOs are expected to remain hot thanks to investors’ increasing risk appetite and a solid general market. But not all tech companies are showing themselves eager to jump on the IPO bandwagon. Others choose to forego the IPO route in favor of other profit-maximizing strategies such as strategic sales through the M&A market, joint ventures and alliances, and refinancing. These alternate measures can spare small companies the added pressure of a market that demands immediate returns. Operating as an independent public company may become especially unsustainable when market demands force leadership to shift focus away from long-term growth. Moreover, an IPO comes with added costs and distractions which may not be worth the potential capital and exposure.
Putting aside all market predictions, the Twitter IPO isn’t just an excellent case study for tech businesses that are considering going public. It may just represent the resurgence of a tech market whose strength has been questioned by analysts ever since Facebook’s troubled entrance to the public marketplace. Whatever happens in the months following its first-day activity could be an indication of the tech market to come. If the activity looks strong, it may spell the demand for more leaders in business to take the reins of these up-and-coming organizations and guide them toward higher operational efficiency with superior management skills – both virtues that stockholders appreciate.
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