Nov 8 As Twitter Inc's chief financial
officer planned the company's initial public offering this year,
he had one overriding goal: to avoid becoming the next Facebook
Twitter CFO Mike Gupta grilled banks about how to sidestep
the problems that beset Facebook's IPO from start to finish,
asking detailed questions about everything from how to pick an
exchange to how to communicate with analysts.
"They were really information and data hogs," said one
person who worked on the process. "They wanted a lot of
different perspectives and to make sure that they did this
In the end, Twitter made different choices from its rival
social networking site. Facebook selected Morgan Stanley
as its lead underwriter, while Twitter picked Goldman Sachs
. Facebook listed on Nasdaq, where trading glitches marred
the initial hours of trading, while Twitter listed on the New
York Stock Exchange.
Twitter made sure its shares were sold for a low enough
price to attract strong interest and keep shares high in their
early days of trading, after Facebook's shares dropped in the
days after its IPO.
Bankers said Gupta and Twitter's director of investor
relations Nils Erdmann also looked closely at what worked - and
what did not - for other Internet companies that went public,
including Pandora Media Inc, Zynga Inc and
A key player in the IPO was Goldman's lead Twitter banker,
Anthony Noto. The New York-based Noto was a former top ranked
equity research analyst who left Goldman in 2008 to serve as an
executive for the National Football League. He rejoined the firm
just two years later to serve as the co-head of global
technology, media and telecom investment banking.
Noto has built the team into the number one U.S. underwriter
for tech IPOs so far this year, over Morgan Stanley and rival
banker Michael Grimes who led the Facebook IPO, as well as other
high profile deals including Google and LinkedIn.
Goldman has taken over 16 technology companies public since
January, including software darling Tableau Software Inc
. For the same period last year Goldman was fifth,
according to Thomson Reuters data.
Those that have worked with Noto praise his low-key,
"Every banker talks about wanting to build a relationship
but after you do a deal with them, you are dropped like
yesterday's newspaper," said Ed DiMaria, the chief financial
officer of Bankrate Inc who first worked with Noto when
he helped take his company public in June 2011. "With Anthony,
it's not about getting paid or the next deal - it's about the
relationship and how he can be helpful to the company."
Twitter could not be reached for immediate comment. Goldman
Sachs and Morgan Stanley declined to comment.
TAKING RIVALS BY SURPRISE
Goldman quietly began working with Twitter in May, helping
the company to draft its S-1 registration statement and submit
it confidentially to regulators. News in late August that the
company's IPO was already underway caught most other investment
banks by surprise.
There was no formal pitch process to fill out the rest of
the syndicate, bankers said, as other banks - Morgan Stanley,
JPMorgan, Bank of America and Deutsche Bank
- were approached by the company and told that they
needed a credit commitment if they wanted to be part of the
The company delved into areas many companies rarely
consider, including how its shares should be allocated among the
underwriters, and whether overpricing or underpricing a deal
would hurt its brand.
Noto and his team were loath to take any risks that would
jeopardize the deal such as putting too many shares in the hands
of retail investors that would flip the stock on the first day
In the end, Noto got his wish as half of the 70 million
shares that Twitter sold during the IPO ended up in the hands of
large long-term holders.
Twitter decided to price its IPO at $26, a relatively
conservative figure as underwriters were weighing pricing the
deal at as high as $28, according to investors. But underwriters
decided that it made sense to price the deal at a lower point
and leave room for a larger first day pop rather than follow in
Facebook's footsteps even if it meant leaving more than $1
billion on the table.
Facebook, which priced its deal at $38, saw underwriters
battle to keep its shares from dipping below the IPO price on
the first day of trading. The shares continued to drop to fall
as low as $17.55 in the months following the company's public
debut. It took over a year for the stock to recover.