A couple of weeks ago, all the business newspapers and magazines were featuring as headline that Twitter had filed the documents for the IPO. The news has been received with surprised reactions and mixed feelings. Even if highly anticipated, the news was unexpected, since Twitter compiled the documents in secret and only publicly announced it, in a 140 characters Tweet, on the 12th of September. Twitter could maintain the process of filing documents for the IPO private, because the JOBS Act allows it.
Emerging Growth Companies
Credit to: Corriere.it
In fact the instant blogging company is considered by the Securities and Exchange Commission (SEC) an “emerging growth company”, that is a firm that has less than $1 billion in revenue or nonconvertible debt. These kind of firms are called out by the JOBS Act from “certain regulatory and disclosure requirements in the registration statement they originally file when they go public, and for a period of five years after that”, is reported on Wikipedia. The logic behind this provision is to allow these companies to “test the waters” and understand whether there is a demand for their stocks.
On the one side,Twitter is not the first company exploiting the JOBS Act provision concerning the IPO of “emerging growth companies”. Many other companies, in fact, which matched the above mentioned requirements, took advantage of it before the social media firm.On the other side, the press and some professional investors commented that allowing a worldwide famous company, like Twitter, to keep information private while filing documents for the IPO can only damage the investing public, for which the more information there is, the better it can invest.
Despite the critiques, Twitter’s IPO has reminded everyone that the JOBS Act is already in part working and that quite some companies are already benefiting from it. From last week, Title II of the JOBS Act has also become effective. Let’s see, when Title III - the one that will allow the general public to invest in firms through equity crowdfunding portals - will become effective, how it will impact the market and whether it will satisfy the public’s expectations.
Rogowsky, M. Twitter IPO: Why Filing In Secret Isn't A Win. Forbes. (2013)
Hall, D. The Morning Ledger: Twitter Puts JOBS Act to Work. WSJ. (2013)
Jumpstart Our Business Startups Act. Wikipedia. (2012)
Photo Credit: Kris Krug. http://bit.ly/RuwVwl
Born and raised in Milan, Italy, Irene is an International Business graduate, with a strong interest for innovative ideas that can simplify our lives.
During her studies, she co-founded an online community for sportspeople and worked in marketing positions at Ogilvy & Mather Advertising and at the European Business Angel Network, in Brussels. She is a passionate blogger about crowdfunding and the startup ecosystem.