Why Twitter's IPO filing was 'confidential'

By taking advantage of a provision of the JOBS Act available to companies with less than $1 billion in sales, Twitter can keep details about its business secret for a few more weeks.

When Twitter announced Thursday via a tweet that it had filed for an initial public offering, it noted that its filing to the Securities and Exchange Commission had been "confidentially submitted."

For many people, the term was a new one, but for Twitter, the distinction gives it some significant advantages over a standard public S-1 filing, according to an expert on IPOs.

Thanks to the JOBS Act of 2012, companies with sales of less than $1 billion can begin the IPO registration process confidentially. According to Jay Ritter, a professor of finance at the University of Florida, there are a number of reasons behind this approach.

First, filing confidentially means that a company like Twitter can go through several rounds of back and forth with the SEC on the wording of its filing, all in secret. That means that when the company formally files to go public -- which would be the first time its filing would be seen in public -- its registration will likely be much cleaner and ready for prime time than might otherwise be the case.

More importantly, in a competitive industry like social networking, the secret filing means that for the several weeks of back and forth with the SEC, Twitter's filing -- which includes substantial information about the company, its customers, revenues, users, and so forth -- stays out of the public eye. "There's various information," Ritter said, that Twitter would "like to keep away from competitors for several more months."

Twitter confirmed to CNET that it had begun the IPO process, but would not elaborate.

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