Dick Costolo, Twitter's chief executive, has been relatively coy about the prospect of his company going public.
In nearly every public interview, Costolo deflects the question, saying--in July 2012, for instance--that he "likes being private." More recently, in January 2013, Costolo said that an IPO was "not necessarily inevitable." And Jack Dorsey, Twitter's co-founder and a current board member, went so far to say that Twitter is "not even thinking" about an IPO. That was April 2013.
"Of course, no one can say precisely what they'll do," says Santosh Rao, the managing director and head of research for Greencrest Capital, a New York City-based boutique advisory firm that follows emerging companies. The firm has carved a niche for itself covering high-growth tech firms; it recently predicted Tableau's successful IPO. "And of course, they'll deny it. But we expect an IPO in mid-2014."
Greencrest's 2014 Twitter IPO projections are based on a variety of metrics, including recent management changes, partnerships with major brands, user growth, and, most importantly, revenue growth.
Although Twitter does not publicly disclose revenues, Greencrest estimates the company is on track to earn more than $605 million in revenue by the end of this year. In 2014, the firm projects Twitter will have revenue of nearly $1.1 billion. EMarketer, a market research firm which also follows the company, has made similar projections. (It believes Twitter will earn $1.33 billion in revenue by 2015.)
Most importantly, Greencrest estimates the company's valuation will reach $11 billion by 2014. By then, Rao believes the company will have all of the building blocks in place for a successful IPO.
The Tech-IPO Market Isn't Hot--But It's Warming Up
Twitter's decision to file won't happen in vacuum, of course. The market matters--and last year's abysmal IPO performance left a bad taste in the mouths of plenty in Silicon Valley, and beyond.
But David Ethridge, the senior vice president and head of the capital markets group at NYSE Euronext, believes that while the first quarter of 2013 has been a relatively quiet period for tech IPOs, the market is poised for a rebound.
"The market is good for IPOs," Ethridge asserts. "You're seeing rational pricing."
Ethridge also believes that tech CEOs are generally waiting longer than ever before when deciding to go public--which may explain why Twitter is taking its time.
"A company needs the ability to project to results," he says. "It sounds simple--but it's hard." Although he said he can't comment specifically about Twitter, Ethridge believes that once the company has fully outlined the various elements of its business model, it will be ready to go.
"They're going to want to make sure that their model pieces are there so they can project to the analyst community," he says. Right now, he says, "it seems like they have a lot of good counsel from the standpoint of the board."
Follow the Leaders
From a personnel standpoint, Costolo is putting the right people into place.
In early May, Twitter announced it had tapped Cynthia Gaylor, an investment banker and former managing director at Morgan Stanley, to be the company's head of corporate development.
The hire didn't offer any conclusive evidence for an immediate IPO, but Gaylor, a Wharton graduate, has the résumé of someone you'd want to have in-house if your company was moving toward a public offering. According to her LinkedIn account, Gaylor "has advised clients on over 150 transactions representing over $100 billion in transaction value," including acquisitions at tech companies such as Facebook, Zynga, Netflix and Linkedin.
Gaylor isn't the only hire who might indicate Twitter was taking an IPO more seriously. In December, Costello shuffled up top management--he promoted Mike Grupta, a former finance executive at Zynga (who helped take the company public in Decemeber 2011) to be the company's chief financial officer, while moving Ali Rowghani from CFO to COO.
While Costolo has been updating his C-suite, there's also been a steady push for recruiting top engineers. There's been rumors of massive Google-poaching, too--AllThingsD went so far as to speculate "hundreds" have been recruited.
Although it's tough to estimate precisely how many Googlers were recruited to work at Twitter, and the company did not respond to multiple requests for comment for this article, some LinkedIn searching and sorting reveals it's pretty clear that those rumors aren't completely unfounded: there are about 250 current employees at Twitter that have previously worked at Google, a healthy percentage of the company's estimated 1,500 employees.
"While C-level personnel changes are important, Twitter has also been quietly hiring experienced tech executives--mostly from Google--for other departments," Rao writes in a January 2013 Greencrest report on Twitter, which was made available to Inc. "The hiring of these seasoned executives suggests a possible positioning for an initial public offering in the next 12 to 18 months, in our view."
Big Indicator: Revenue Growth
Unlike plenty of other tech firms, Twitter makes actually makes money, and does so in several ways.
In October 2011, the company first introduced Promoted Tweets, which are monetized on a cost-per-engagement basis, which means impressions are free, but a only brand pays when someone clicks, retweets, replies to, or favorites a Promoted Tweet.
There are also new revenue streams developed through Promoted Trends and Promoted Accounts, which, as Greencrest points out, "allow a greater potential for increased ROI numbers for advertisers, thereby increasing interest in Twitter's Promoted Suite for marketers."
Twitter is also winning where others are failing--eMarketer estimates that by 2015, 60 percent of the company's revenue will be generated on mobile.
In January, Twitter announced it was selling $80 million of company stock to give early employees a bit of liquidity. This, in turn, limited the amount of trading in secondary markets, and essentially acted as a pressure valve for an IPO. Once a private company reaches 500 shareholders, they're required to disclose more information. ("Without offerings like this one to BlackRock, the only way to get employees liquidity is to IPO," noted TechCrunch. "That hasn't necessarily been productive for companies like Facebook, Zynga, and Groupon who got chewed up by the public market.")
Given a choice, Rao believes that Twitter would indeed to prefer to stay private--echoing Costolo's sentiments from last July. But the company's raised more than $1 billion in venture capital--and those investors need a way out, even if it takes a bit longer than expected.
"They've learned to not make the same mistakes [as other companies]," says Rao. "Facebook had telegraphed the IPO, and there was so much hype. These guys would rather wait--and then boom, just get it out."