SEC questioned Twitter claim of profit growth in IPO run up

Twitter changed a prospectus focus to revenue growth rather than profitability after SEC queries

U.S. securities regulators questioned an early version of Twitter's initial public offering prospectus that claimed the social media company was becoming more profitable when it was actually losing increasing amounts of money.

That and other tidbits were revealed in regulatory filings made by the company on Friday that show the back-and-forth with the U.S. Securities and Exchange Commission as the company approached its IPO on Nov. 7.

Twitter first submitted its IPO prospectus to the SEC on July 12, exactly two months before it publically acknowledged the filing and its IPO plans. The document was provided confidentially for review, and the company's claim about profitability was quickly questioned by the SEC.

"We note your statement that you 'have experienced significant improvements in [your] operating results in recent periods.' Please revise this disclosure to address the fact that your net loss in the first quarter of 2013 was larger than the same period in 2012 and the two quarters immediately preceding it," the SEC instructed Twitter on Aug. 8.

Twitter's financial statement showed the company recorded a net loss of $79 million in 2012 and had already lost $69 million in the first six months of 2013. Two months later, it would revise the prospectus to show losses of $134 million for the first nine months of the year.

Twitter decided to highlight revenue growth rather than increasing losses and replied to the SEC that it "has revised the disclosure on page 2 to clarify that it has experienced rapid growth in its revenue, rather than significant improvements in its operating results, in recent periods."

The SEC also quizzed Twitter about Facebook's decision to disable embedding of Instagram photos in its timeline.

"We note that following Facebook's acquisition of Instagram, Instagram disabled photo integration with Twitter. Please describe the consequences of Facebook's decision in terms of your service and the user experience. In addition, identify any other material third-party integration that you believe is at risk for similar elimination and the potential consequences," the SEC said.

Twitter revised its disclosure and added "it is not aware of any other material third-party integration that it believes is at risk for similar elimination."

Regulators also pushed Twitter on how changes in the way Apple allows third-party access to iPhone ID numbers could impact its business (the company said it won't), what proportion of false or spam accounts made up its user numbers (it had excluded all those identified) and how it generated data on timeline views for the first three months of 2012 (it estimated them based on user growth).

Such correspondence is a typical part of filing for an IPO.

Martyn Williams covers mobile telecoms, Silicon Valley and general technology breaking news for The IDG News Service. Follow Martyn on Twitter at @martyn_williams. Martyn's e-mail address is martyn_williams@idg.com

Tags business issuesU.S. Securities and Exchange Commissionregulationtwitterfinancial resultsSEC Filingsgovernment

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Martyn Williams

IDG News Service

Comments

Comments are now closed.

Most Popular Reviews

Follow Us

Best Deals on GoodGearGuide

Shopping.com

Latest News Articles

Resources

GGG Evaluation Team

Kathy Cassidy

STYLISTIC Q702

First impression on unpacking the Q702 test unit was the solid feel and clean, minimalist styling.

Anthony Grifoni

STYLISTIC Q572

For work use, Microsoft Word and Excel programs pre-installed on the device are adequate for preparing short documents.

Steph Mundell

LIFEBOOK UH574

The Fujitsu LifeBook UH574 allowed for great mobility without being obnoxiously heavy or clunky. Its twelve hours of battery life did not disappoint.

Andrew Mitsi

STYLISTIC Q702

The screen was particularly good. It is bright and visible from most angles, however heat is an issue, particularly around the Windows button on the front, and on the back where the battery housing is located.

Simon Harriott

STYLISTIC Q702

My first impression after unboxing the Q702 is that it is a nice looking unit. Styling is somewhat minimalist but very effective. The tablet part, once detached, has a nice weight, and no buttons or switches are located in awkward or intrusive positions.

Latest Jobs

Shopping.com

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?