Twitter Marches Toward IPO With Stock Lockup Request
Twitter continues to march toward its highly anticipated initial public offering. Sources told Quartz that the social media platform could make its S-1 filing public as early as this week, a move that could prime the investment pump with critical data about the company’s business model and financial condition. Adding fuel to the speculative fire is a report from Reuters that revealed that Goldman Sachs (NYSE:GS), the lead underwriter of the IPO, sent an email to to private shareholders asking that they commit to a six-month lockup.
Early investors in a company are often asked to agree to a lockup period ahead of an IPO. This ensures that those investors — who usually have large stakes in the company — don’t use the IPO as an opportunity to exit their position all at once, flooding the market with shares and driving down the price as a result.
Twitter announced via a tweet on September 12 that it had confidentially filed its S-1 document, but insiders revealed that the company actually submitted the paperwork to the Securities and Exchange Commission in July. Twitter was able to submit its filing privately thanks to the Jump Start Our Business Startups Act (JOBS Act), which was passed in 2012 in an attempt to encourage small businesses to seek public funding through the markets.