Since going public, Twitter has struggled a bit as it has to contend with slowing user growth. While the company has vowed to combat this problem, that will also take money. And since the company is still operating at a net loss, which leaves one option: it needs to raise money.
So, the publicly traded company announced on Wednesday that it will be looking to raise a big sum: between $1.3 billion and $1.5 billion, through the sale of convertible notes. There will be two $650 million debt offerings, one due in 2019 and the other due in 2021, with an addition $100 million up for sale in each round "to cover over-allotments, if any."
Twitter needs the money, as its losses have been growing. In the most recent quarter, Twitter reported revenue of $312 million, up 124% year to year. At the same time, though, it's losses deepened severely in the same time period; GAAP net loss was $145 million, compared to a net loss of $42 million in the same period last year.
So once it raises the above state funds, what will Twitter do with it? The language that Twitter is pretty vague about that:
"Twitter expects to use a portion of the net proceeds of the offering of the notes to pay the cost of the convertible note hedge transactions described above (after such cost is partially offset by the proceeds to Twitter of the warrant transactions described above), and to use the remaining proceeds of the offering for general corporate purposes."
"General corporate purposes" tells us exactly nothing, of course. VatorNews has reached out to Twitter for more information regarding what it plans to do with the money it will raise. We will update if we learn more.
Some have already been speculating that the company will use the funding for acquisitions, and that seems like a distinct possibility. After all, Twitter has bought 13 companies since the beginning of 2013, and using this funding could help the company bolster its revenue, and bring in new users.
The new funding may also allow the company to diversify its revenue streams. Of its revenue last quarter, $277 million came from advertising, and the company has recently shown that it wants to branch out, specifically into e-commerce, with a launch of a new "buy button."
Of course, it's far from unprecedented for a publicly traded company to borrow money in this matter, especially when interest rates are low. Netflix did the same thing earlier this year, with plans to raise $400 million; as did Google, with plans to raise $1 billion
(Image source: c2c.bigfuel.com)
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Steven Loeb
Startup/Business
Joined Vator on
Twitter is an online information network that allows anyone with an account to post 140 character messages, called tweets. It is free to sign up. Users then follow other accounts which they are interested in, and view the tweets of everyone they follow in their "timeline." Most Twitter accounts are public, where one does not need to approve a request to follow, or need to follow back. This makes Twitter a powerful "one to many" broadcast platform where individuals, companies or organizations can reach millions of followers with a single message. Twitter is accessible from Twitter.com, our mobile website, SMS, our mobile apps for iPhone, Android, Blackberry, our iPad application, or 3rd party clients built by outside developers using our API. Twitter accounts can also be private, where the owner must approve follower requests.
Twitter started as an internal project within the podcasting company Odeo. Jack Dorsey, and engineer, had long been interested in status updates. Jack developed the idea, along with Biz Stone, and the first prototype was built in two weeks in March 2006 and launched publicly in August of 2006. The service grew popular very quickly and it soon made sense for Twitter to move outside of Odea. In May 2007, Twitter Inc was founded.
Our engineering team works with a web application framework called Ruby on Rails. We all work on Apple computers except for testing purposes.
We built Twitter using Ruby on Rails because it allows us to work quickly and easily--our team likes to deploy features and changes multiple times per day. Rails provides skeleton code frameworks so we don't have to re-invent the wheel every time we want to add something simple like a sign in form or a picture upload feature.
There are a few ways that Twitter makes money. We have licensing deals in place with Google, Yahoo!, and Microsoft's Bing to give them access to the "firehose" - a stream of tweets so that they can more easily incorporate those tweets into their search results.
In Summer 2010, we launched our Promoted Tweets product. Promoted Tweets are a special kind of tweet which appear at the top of search results within Twitter.com, if a company has bid on that keyword. Unlike search results in search engines, Promoted Tweets are normal tweets from a business, so they are as interactive as any other tweet - you can @reply, favorite or retweet a Promoted Tweet.
At the same time, we launched Promoted Trends, where companies can place a trend (clearly marked Promoted) within Twitter's Trending Topics. These are especially effective for upcoming launches, like a movie or album release.
Lastly, we started a Twitter account called @earlybird where we partner with other companies to provide users with a special, short-term deal. For example, we partnered with Virgin America for a special day of fares on Virginamerica.com that were only accessible through the link in the @earlybird tweet.
What's next for Twitter?
We continue to focus on building a product that provides value for users.
We're building Twitter, Inc into a successful, revenue-generating company that attracts world-class talent with an inspiring culture and attitude towards doing business.