Twitter IPO: will infamous whale picture show up?

Will the fail whale haunt the upcoming Twitter IPO? Photo: Wikipedia

WASHINGTON, October 17, 2013 — If you’re familiar with Twitter at all, you’ve probably seen the “fail whale” at least once or twice. This is the graphic of a large whale being carried aloft by a flock of small birds with the message “Twitter is Over Capacity” or something else explaining the problem. With the Twitter initial public offering (IPO) on the horizon, some are wondering if the fledgling social media company will be able to do better than Facebook did back in 2012.

NYSE for IPO: Twitter is Not Facebook

When talking about the upcoming Twitter IPO, the first thing you need to realize is that this social media company is not the same as Facebook. In fact, it’s quite different. Upstart Business Journal has reported that Twitter is using the NYSE instead of NASDAQ for its IPO.

Learning from Facebook’s Mistakes

One of the things Twitter has going for it is that it was able to study Facebook’s IPO closely. This has most likely given the company a better chance of not repeating mistakes the other social media company made when going public. For example, Facebook may have waited too long to come to market with its own IPO. This made it more difficult to show it would have explosive growth once it had gone public.

Another mistake that Facebook and its underwriters made was in setting the stock’s initial price so high. While it has finally moved past that initial number in recent weeks, the stock dropped precipitously after its IPO and was stuck in a rut for a considerable period of time, generating plenty of bad feeling among retail purchasers of the stock who felt they’d be taken advantage of.

If Twitter takes a cue from the Facebook offering, in which greed got in the way of common sense, learning from the debacle, and choosing to set its asking price more realistically, it may be able to do better right out the gate when its own IPO goes public.

Bumpy Road Ahead

While Twitter may have been able to study Facebook’s IPO closely and can try to avoid some of the mistakes that were made, it has other problems to worry about as well. It recently reported its worst quarterly loss in three years. This is not good news when you’re about to go public. Even worse, there’s no real indication that Twitter has a solid plan to reverse the recent trends.

Twitter’s Q3 2013 numbers were negative $65 million, which is about three times the amount they were in the red in the same quarter in 2012, according to a report by ABC News. No mention of when the IPO - one of the most anticipated since Facebook - will happen or what the IPO price-range of the shares will be, but some think this information may be known before Thanksgiving 2013.

At the same time, Twitter has never said they were worried about monetizing its social media network too heavily. It’s taken steps to sell its own ads and marketing to companies, but its native advertising hasn’t been as successful as it had hoped. Still, looking at other numbers - like traffic - it’s hard to see how it can continue to lose money much longer, given current trends.

The social media company hasn’t had a profitable month since it launched roughly eight years ago. To date it’s lost close to $500 million. Monetizing its large network of users needs to be one of its priorities if it follows through on its plan to go public. Whether or not this happens, however, is another story entirely.

Life After the Twitter IPO

Whatever happens in the market, life will undoubtedly continue after the Twitter IPO. Some people may make money by getting in early and flipping the stock if it pops, while others may lose money by trying to be too greedy. Either way, many signs point to the social media company having a successful IPO. And you can be sure many people will be writing about it all over the Internet.

Mashable has reported that Twitter is trying to act more like Google before and after its IPO rather than emulate Facebook. The tweet the company sent out immediately after their IPO announcement told its employees to get back to work. In many ways, it sees its upcoming IPO as just another round of funding rather than a radical change in the way the company operates.

Having said that, the fact that Facebook’s stock price has recently been heading north is good news for Twitter, which may be able to pull off an IPO that will go down in the history books—in a positive way. And if not, perhaps it can rent a billboard and run an ad campaign featuring its fail whale apologizing for not being able to handle the company’s IPO.

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Joy Mali

Joy Mali is an active finance writer who shares financial management tips that educate people about how important their credit is for living a successful life. Joy has also written for the Examiner and Yahoo Voices about unique methods of earning money and credit management.

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