Twitter IPO Unlike Facebook's

 | Sep 13, 2013 | 9:44 AM EDT  | Comments
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Stock quotes in this article:

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gs

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Even though Facebook (FB) is now trading around its opening day highs, it's taken 16 long months to get here.

At its lows, Facebook was derided for not having a mobile strategy. It also lived in fear that it might lose its best employees, who saw their stock stuck in the mud along with their options and restricted stock units.

Twitter has been the kid brother to Facebook, always thought of as smaller and with less long-term potential. Like any smart kid brother, Twitter has watched what's happened to Facebook over the last few years and learned from its big brother's successes and failures. Thursday's announcement that the micro-blogging website would undergo a "confidential" initial public offering was the first sign that it is determined to avoid the debacle that marred Facebook's IPO.

The confidential IPO process is new, thanks to the Jumpstart Our Business Startups, or JOBs Act. It gives companies of a certain size the opportunity to go through the back-and-forth with the Securities and Exchange Commission before revealing its strategy and financials to the world. Why not take advantage of that?

Groupon (GRPN) wishes it could have done that, rather than go through the embarrassment of explaining to the world what consolidated segment operating income, or CSOI, was. Although Facebook didn't have any errors in its initial S-1 filing process, the world did sit up and demand to know what Facebook's mobile strategy was to that point. Twitter hopes it can answer any difficult questions early in the process, before releasing its S-1.

Bloomberg reported that Twitter has selected Goldman Sachs (GS) as its lead underwriter. That's a sign that Twitter doesn't want to go through the ordeal of overpricing its IPO the way Facebook did with Morgan Stanley (MS) as lead underwriter. Morgan Stanley has handled many successful IPOs and will continue to do so, but Twitter is going across the street to Morgan's main competitor, which likely promised not to make the same mistakes.

The next thing to watch for is where Twitter lists. My strong suspicion is that it will be the NYSE as Nasdaq has had its problems of late, and certainly did with the Facebook offering. For the same reasons Twitter picked Goldman, Twitter will likely pick Nasdaq's competitor to list. And don't forget that many Silicon Valley companies have chosen to list on the NYSE lately, like LinkedIn (LNKD) and Yelp (YELP), so it won't be unprecedented for Twitter.

Will all these moves ensure Twitter holds a successful IPO? It's very likely. Success will mean that Twitter raises the most money possible, but also ensures that investors at the ground floor will also do well. Everyone will be happy.

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