Twitter Inc. on Thursday revealed plans to raise $1 billion in a public offering, looking to cash in on a messaging service that has transformed public conversation but is still proving itself as a business.
European Pressphoto Agency Twitter CEO Dick Costolo
Potential buyers for the first time saw the financials behind one of the most anticipated stock-market debuts of the year, which showed the social network's revenue nearly tripled to $316.9 million in 2012, and produced a loss of $79.4 million.
Twitter had previously shielded the figures by filing its initial IPO documents confidentially, under a new federal law.
The new offering document, filed with the Securities and Exchange Commission, didn't specify how many shares would be sold, the potential price per share or an estimated value of the company. The amount raised in the filing is an estimate that could change when Twitter launches its investor roadshow.
Shares in the company have changed hands privately at valuations around $10 billion, but the company is likely to seek a higher valuation, people familiar with its thinking have said.
Twitter didn't specify which exchange its stock will be listed on, but it said its ticker symbol will be TWTR.
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In seven years, Twitter has grown from a wobbly startup to a social phenomenon where in just 140 characters its 215 million monthly active users tap out about 500 million messages each day.
The short-message service emerged as a global forum where users break news, organize protests, and gripe about what they ate for lunch. As early as 2008, Twitter turned eyewitnesses into "citizen journalists" who reported on a terrorist attack in Mumbai.
Now, once walled-off public figures including the pope, Warren Buffett and Kanye West "tweet" their thoughts and interact with other users. Twitter CEO Dick Costolo uses the service to answer users' troubleshooting queries. Businesses, stock pickers and politicians alike analyze the sentiments expressed on Twitter as important indicators.
Despite its ubiquity, Twitter's strength as a business is unclear. Rival Facebook Inc. had a large profit and 845 million monthly active users when it went public in May 2012, a huge bragging point as it pitched itself to investors.
Like Facebook, Twitter makes money by selling advertising based on users' posts. As they compete for advertisers, both companies position themselves as the world's online town square.
For years, Twitter executives showed little interest in building the business, focusing instead on the user experience. More recently, it has sharpened and expanded its advertising strategy with acquisitions, new products including video ads, and new media partners. Facebook has responded by adding features to highlight its own use for real-time conversations, and by forging partnerships with TV broadcasters.
Big challenges remain. Twitter has struggled to keep users online after newcomers satisfy their initial curiosity. Some analysts say the service isn't intuitive. For people without political agendas, brand images or music albums to market, the notion of broadcasting musings to strangers can be perplexing and the Twitter lingo of communicating through "retweets" and "hashtags" confusing.
"They certainly have a lot of work ahead of them to get mainstream America to understand" how Twitter works, said Brian Solis, an analyst at the Altimeter Group.
Goldman Sachs is spearheading Twitter's IPO, with help from Morgan Stanley and J.P. Morgan Chase & Co. Bank of America Merrill Lynch, Deutsche Bank AG, Allen & Co. LLC and CODE Advisors are also playing roles. The filing doesn't state the percentage of the IPO's proceeds the banks will take as commission.
The filing suggests that Twitter's IPO will be far smaller than Facebook's $16 billion offering last year, largely because Twitter is a much smaller company. In 2011, the year before its IPO, Facebook posted $3.7 billion in sales and $1 billion in net income.
As they prepared to go public, Twitter executives have sought to sidestep the pitfalls that marred Facebook's debut last year, people familiar with the company's thinking have said. It named Goldman Sachs Group Inc. as its lead investment banker, rather than Morgan Stanley, which led Facebook's offering.
The company's chief financial officer, Mike Gupta, a former executive at Yahoo Inc. and Zynga Inc., faces a delicate balancing act in pricing the offering. Facebook raised its offering price to $38 and expanded the number of shares offered in the days before its IPO, contributing to a 50% price drop in their first three months of trading; they have since climbed above $38.
On the other hand, Mr. Gupta is wary of setting the price too low, which would allow some investors to pocket gains that could have filled the company's coffers, people familiar with the situation said.
Investors may have as little as three weeks to review the documents before the company launches its "roadshow" to meet with institutional investors and formally pitch them on buying shares. The ultimate price of the shares will depend partly on the reception in those meetings.
The deal will be watched by other technology companies looking to go public, such as Box Inc., the online storage company, and Square Inc., the mobile-payments company created by Twitter co-founder Jack Dorsey. Several of those companies delayed potential public offerings after shares of Internet companies such as Facebook, Groupon Inc. and Zynga Inc., sagged after their debuts. But shares in Internet companies have surged this year, amid a broader rally in the U.S. stock market.
Write to Telis Demos at telis.demos@wsj.com and Yoree Koh at yoree.koh@wsj.com
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