Kara Swisher

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Ahead of July Filing, Twitter IPO Designed as “Less Anti-Facebook Than Anti-Old-Twitter”

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Did you know Twitter actually filed its IPO documents in mid-July?

Or that an investment firm run by Suhail Rizvi will be one of the bigger shareholders listed when its regulatory documents go public?

Or that the float for the IPO will be much smaller than Wall Street expects, because few current investors are selling into it?

No, you didn’t, which was the goal of the once out-of-control company so well known for its myriad of foibles that one major rival had described as a “clownmobile that crashed into a goldmine.”

No longer, it seems — except, it is hoped by Twitter, for the goldmine part.

To get there, in interviews with more than two dozen sources familiar with the Twitter IPO process, the famous online communications company has opted for one what person dubbed a “containment strategy.”

That meant a filing in mid-July with the Securities and Exchange Commission using the Jumpstart Our Business Startups Act that allowed Twitter to keep it under wraps. There was no public announcement until this month, an effort to file in such a way as to minimize disruption to the company and maximize control by its managers and board.

The ultimate goal, said those with knowledge of the situation, was to finally banish the image of the loosey-goosey Twitter of old, with its leaky board, its constant service crashes and its dramatic proclivity to show off all its growing pains in public.

“Like the service, the aim was to make the Twitter IPO as simple as possible,” said one person familiar with the situation. “While everyone wants to compare it to trying to avoid the circus around the Facebook IPO, it’s really less anti-Facebook than anti-old-Twitter.”

Said another person close to the company: “We had been everyone’s doormat for far too long, but a transformation did happen and this IPO process reflects that perfectly.”

Among the many ways that was done include the severe limiting of information around the process to the board and several others, in an effort orchestrated by key managers. This tight circle includes: CEO Dick Costolo, COO Ali Rowghani and CFO Mike Gupta, with some critical help from Twitter’s most IPO-experienced director, Peter Currie.

Along with the rest of the board, which meets every other month for two days, the group plotted the IPO over a much longer time period, a process that included taking the pressure of possible selling by early investors and employees.

That was perhaps the most important effort, said many. “There was a goal to make sure there was no selling pressure at the IPO, as had happened with Facebook, when everyone wanted out,” said one source. “So, they took the air out of the tires and, therefore, no one wants out of this thing.”

It was a lot of air to deal with, with various investors pouring more than $1.1 billion in funding into the company over the last six years. That includes its first $5 million investment from venture firms like Union Square Ventures that valued the company at $25 million in 2007 to a $100 million investment in 2009 that brought in Insight Venture Partners and valued the company at $1 billion to a $200 million round in early 2010 that included Kleiner Perkins.

The last pair of massive transactions were for a total of $400 million for Twitter shares from DST Global and another $400 million from under-the-radar private equity firm Rizvi Traverse that is run by Suhail Rizvi.

Rizvi, sources said, met the members of the Twitter team via longtime and major Twitter investor Chris Sacca, with whom he has done several of his investments in the company, including the last one.

Sacca has been a well-known Silicon Valley player and Twitter shareholder, but Rizvi’s fund has not publicly surfaced as a major owner.

But together they played a key role in sopping up shares — something Sacca had already been doing — to purchase them directly from big holders, such as co-founder Evans Williams and Biz Stone, as well as early employees like Jason Goldman.

“Suhail has been very helpful in helping the board clean up the investor ownership,” said one person close to the situation about Rizvi, who is also an investor in Square and, more recently, Flipboard. “He has been discreet and has a long-term view that we needed.”

The powerful investment company Blackrock also bought up shares from employees and others in yet another deal, to put them in “strong hands.” In other words, to shareholders not intent on flipping the stock when it went public.

Speaking of being less noisy, that was the point of the abandonment of an IPO bake-off process to choose investments banks and the selection of one particular banker — Goldman Sachs’ Anthony Noto — whom managers felt was the kind of understated person they wanted to work with. He was selected in April.

A former CFO of the National Football League and also a former analyst, the West Point graduate is considered straight-shooting. Even more important was that he was less flashy than others in the space, such as Facebook’s high-profile banker, Michael Grimes of Morgan Stanley.

Except for his apparent adoration of the Dallas Cowboys, said one person, Noto is someone who is often described as “always in control” and “would love to never be in public eye, because he is not trying to prove anything.”

The choice came after a long relationship built over time by Noto. “He was always about service, service, service, rather than about the IPO,” said one person. “It mattered a lot when it came down to it that he had a close relationship already in place with Dick, Ali and others.”

Still, other banks are going to be part of the IPO, which could happen sooner than it is thought. Besides Morgan Stanley, other banking players likely to be involved include one with massive financing capabilities (either Bank of America or J.P. Morgan) and smaller ones such as Allen & Co.

But, said many people with knowledge of the situation, all those bankers might not have that much to sell. Currently, there are no major investors selling into the IPO and many, in fact, want to purchase more shares.

“This will surprise people because it will be relatively small in terms of what will be raised, the smallest amount of shares on a percentage basis,” said a person, a sentiment that was echoed by others. “This is seen as the next evolution by Twitter and not an event in and of itself.”

Said another investor: “This is clearly one of the most anticipated IPOs, but Twitter is clearly trying to avoid a media firestorm and tempering a complete extravaganza. It’s been a goal not to try to amp this up as the second coming and get all the benefits without all the pomp and circumstance.”

That has also meant no hiring of a big outside public relations firm, as is typical with IPOs, as well as an ability to talk to accredited investors before the real information about Twitter’s financial performance is unveiled.

“The bird has grown up and is finally ready to fly on its own,” said one person close to the situation. “But in the direction it wants.”


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Just as the atom bomb was the weapon that was supposed to render war obsolete, the Internet seems like capitalism’s ultimate feat of self-destructive genius, an economic doomsday device rendering it impossible for anyone to ever make a profit off anything again. It’s especially hopeless for those whose work is easily digitized and accessed free of charge.

— Author Tim Kreider on not getting paid for one’s work