This is why Twitter needs an IPO

Twitter CEO Dick Costolo has indicated time and again that he's in no rush to take Twitter public. I don't blame him: the company has a lot of work to do. It's in a great spot right now and is focused on aggressive growth. This just isn't the right year for a Twitter IPO.

ReadWriteWeb takes a different angle on this, wondering whether why Twitter would bother at all:

A lot can happen between now and 2013, and while all signs point towards an IPO within the next two years, there are no givens. One of the biggest drivers will be the Facebook IPO: if Facebook fails to live up to the hype (as LinkedIn, Groupon and Zynga all failed to do in 2011), Twitter may rethink.

Twitter ‘doesn't really need the money', ReadWriteWeb adds, and ‘a public filing doesn't solve any problems for Twitter.

I agree … to a point.

Right now, going public doesn't solve anything for Twitter. The company is believed to have plenty of capital, and its strategy, a prudent one, is to focus on growth as a private company. But, it can't do this forever. There are two reasons Twitter will need to consider an IPO at some point: talent and regulation.

The former is important. The battle for top talent in Silicon Valley is intense, and employees who have patiently waited for a liquidity event will get antsy after a while, especially once their shares have vested. To keep its brains in the company, Twitter will need to show a light at the end of the tunnel, particularly for early employees who took options in place of some cash compensation.

While you can buy some time with talent, Twitter may then run into the second issue: regulation. And there's little the company can do about it. When Twitter hits the 500 shareholder threshold, it will have to file with the SEC, at which point, it will be assuming a burden similar to that of a public company. Unless the law changes, this could deprive Twitter of some flexibility.

It doesn't make sense for Twitter to go public yet, but there are factors it will have to start to consider.

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Source: ReadWriteWeb

Photo: kenjimori via Flickr