Explaining Twitter's 'secret' IPO

After the announcement, Twitter sent sent out this photo, along with the note: "Now, back to work."

NEW YORK (CNNMoney)

How did Twitter do that? And why?

It's all thanks to the Jumpstart Our Business Startups, or JOBS Act.

The law, passed in 2012, applies to so-called emerging growth companies, those with up to $1 billion in annual revenue. Filing in such a way lets companies:

• Test the waters: Twitter executives can quietly approach select investors and gauge their interest without worrying about receiving any pressure from media or analysts.
• Buy time: Getting started in secret gives Twitter a few more weeks -- or months -- to build up its advertising strategy without revealing its finances.
• Show less paperwork: The company doesn't have to expose its books as much as it would in a traditional IPO. Under the new rules, only two years of financial statements need to be audited instead of the usual three.

Related: Twitter files for IPO

The goal of an IPO is to raise money, and Twitter won't be able to start doing that just yet. The company will eventually need to file a public registration statement 21 days before kicking off its fund-raising roadshow.

Another benefit: That helps the company get things in order before becoming the center of attention.

"It allows them to work out any significant issues the SEC might have with their accounting before it sees the light of day," said Ira Rosner, a securities lawyer with Greenberg Traurig.

In a typical IPO, investors see the back and forth with the SEC -- with potentially embarrassing results.

Twitter isn't alone in its approach. The use of confidential IPOs has been on the rise ever since the JOBS Act was passed. Manchester United (MANU) did it last year, as did SolarCity (SCTY), Trulia (TRLA) and GlobeImmune (which isn't listed yet).

Confidential filings have outpaced regular IPOs two to one. Approximately two-thirds of the 131 IPOs priced so far this year have come from confidential filings, according to Renaissance Capital.

First Published: September 12, 2013: 7:07 PM ET

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Xiaomi CEO tired of Steve Jobs comparison

Xiaomi CEO Lei Jun has been called the Steve Jobs of China.

BEIJING (CNNMoney)

Lei Jun founded Xiaomi only three years ago, and the phonemaker is still relatively unknown outside Asia. But Xiaomi has been quietly stockpiling tech talent as it builds a business worth $10 billion.

The company already sells more smartphones in China than Apple. Xiaomi also has a deal with telecom giant China Mobile (CHL), something Apple (AAPL, Fortune 500) has so far failed to secure. (Although Apple and China Mobile are reportedly close to inking a partnership.)

"They [Apple] don't really care about what the users want," Lei said Wednesday during an interview in Beijing. "They imagine what the users want."

His message? "Xiaomi is different."

"Xiaomi's priority is not revenue, not profit, nor market share," Lei said. "We focus on making the product that makes users scream."

Still the comparisons come, helped along by Lei's wardrobe choices. The Chinese CEO is fond of announcing new products in dramatic fashion, and he sometimes even dons Jobs' trademark outfit of blue jeans and a black shirt during presentations.

Related story: Extra cost to make Google phone in U.S is $4

Yet the way the two companies approach the Chinese market could hardly be more different.

Xiaomi's products -- which some critics deride as Apple knockoffs -- are much more affordable.

The company claims its latest offering, a low-cost smartphone called "red rice," sold its entire first batch of 100,000 units within 90 seconds. It costs around $130. Apple's new iPhone 5C, which some thought would be a cheaper phone that could gain share in China, will cost around $730.

Xiaomi engineers are also encouraged to speak directly to consumers, gathering feedback they use to tinker with its software. The turnaround is rapid, and Xiaomi updates its Android operating system every Friday.

"Our business model is more similar to Amazon," Lei said, referring to Amazon's (AMZN, Fortune 500) habit of selling hardware at cost.

"We sell all our products online and our gross profit rate is very low. Our price is one third of Apple's," he said. "We make our profits through content and services."

Related story: China's Xiaomi poaches top Google exec

It's a model that Xiaomi may soon take abroad. Xiaomi hired Google (GOOG, Fortune 500) executive Hugo Barra last month, a move that signals Xiaomi's intent to offer its products outside China for the first time.

"Of course," Lei said when asked whether Xiaomi was looking to sell in other countries. "Hugo Barra is the very first true foreigner in Xiaomi."

"We hope that, together with us, he can experience the Xiaomi culture, the Xiaomi model and grow with Xiaomi," Lei said. "Then he will be in charge of the entire international business development of Xiaomi."

Related story: The 'Apple of China' looks abroad

Going global is a big risk, and something not many Chinese companies have managed to pull off successfully.

Chinese companies -- like Taiwanese manufacturers before them -- are still better known as the worker bees that execute the innovative designs of Western firms.

If Lei has his way, the international expansion won't be fueled by a public offering. He said he would like to hold off on an IPO for a couple of years.

"The reason is very simple," Lei said. "We think that people still need time to understand our company and the Xiaomi model."

-- CNN's Yuli Yang and Pamela Boykoff contributed reporting.

First Published: September 12, 2013: 9:51 PM ET

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Twitter files for IPO

Twitter's IPO is confidential, so its financial information won't be immediately released to the public.

NEW YORK (CNNMoney)

The company sent its filing confidentially to the Securities and Exchange Commission. Many soon-to-be-public companies have been taking advantage of new regulations passed last year in the Jumpstart Our Business Startups (JOBS) Act, which allows smaller businesses to keep its financial data out of the public's eye.

Under the act, companies with less than $1 billion of annual revenue can file for confidential IPOs.

Related: Twitter's identity crisis

Twitter has been rumored to be going public for the past few years. After Facebook's (FB) IPO in May 2012, it was widely believed that Twitter would be the next major technology company to offer its stock to public investors.

It's a good time to be going public, since the stock market has been treating social networks particularly well lately. After bumpy starts, both Facebook and LinkedIn (LNKD) hit all-time highs on Wednesday.

Twitter has exploded in usage since its creation in 2006. As of March, it had more than 200 million active users around the world. Last month, the company set a record of 143,199 tweets per second during the airing of a Japanese television show.

Like Facebook, the question for Twitter has never been how much people were using it but on how to make money off them.

Twitter serves ads via promoted tweets, promoted corporate accounts and enhanced profiles of companies. But how users' engagement with those products translates into sales isn't well-known -- and won't be until the company releases its financial data.

A spokesman from Twitter declined to comment, saying the company's only statement would be the tweet it sent out about the IPO.

Related: The next Mark Zuckerberg

Companies that file IPOs confidentially are only required to make their financial statements public 21 days before they start their "roadshow" to sell investors on the company's merits.

In a typical IPO, companies file dozens of updates about the company's finances, typically over the course of several months.

The confidentiality provision in the JOBS Act was intended to allow smaller companies to quietly gauge the interest of potential investors without spilling the beans to the public. Many companies ultimately choose not to pursue an IPO after talking to investors.

About two-thirds of the 131 IPOs priced so far this year have come from confidential filings, according to Renaissance Capital. More than 90% of eligible companies have filed confidentially since the bill was passed.

Several prominent companies have filed confidential IPOs. Among them are English soccer team Manchester United (MANU), online real estate site Trulia (TRLA) and movie studio owner MGM Holdings.

First Published: September 12, 2013: 5:22 PM ET

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Marissa Mayer: Yahoo gets 12,000 resumes a week

At TechCrunch Disrupt, Mayer said the company now gets 12,000 resumes a week -- up dramatically by a factor of five or six.

NEW YORK (CNNMoney)

Speaking at TechCrunch Disrupt, Mayer said the company now gets 12,000 resumes a week -- up dramatically by a factor of five or six.

Since Mayer took the reins of the struggling company in 2012, the former Google (GOOG, Fortune 500) executive has hired back a number of ex-Yahoo employees. Over the course of a year, Mayer said 10% of the hires have been ex-Yahoo employees, or "boomerangs," as she called them.

Mayer, who described the company as "the world's largest startup," outlined her strategy to get the company back on the road to success.

Related: Yahoo struggles to find its place online

She emphasized four major factors for the company: People, products, traffic and revenue.

"You have to get the right people before you can build the right products," Mayer stressed. Apart from hiring ex-Yahoo employees, she has also overseen more than a dozen acquisitions, and says much of Yahoo's (YHOO, Fortune 500) focus will be on mobile growth.

According to Mayer, the company just passed 800 million monthly users, an increase of 20%. Of those, she said 350 million came from mobile.

But don't expect a quick turnaround. When asked about growth strategy, Mayer said the company is focused on investing in the long term.

Related: How Yahoo's acquisitions fit into Mayer's master plan

"When I look at the state of what we're doing inside the company, it's going to take multiple years -- three or more to see the company going in the direction we want it to go to," she said.

Mayer also said it wouldn't be an easy road.

"It's a big challenge but I've got a great group of people that are rising to the challenge."

First Published: September 11, 2013: 6:53 PM ET

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Rising onion prices bring India woes home

NASHIK, India (CNNMoney)

To make matters worse, rising prices are wreaking havoc on household budgets -- a phenomenon felt most acutely in an astronomical increase in onion prices that far outstrips the country's 6% inflation rate.

The onion is a crucial part of Indian cuisine and the spike in prices -- by as much as 500% in a month in some regions -- is leading shoppers to cut back.

That is no small sacrifice for a nation that consumes more than 15 million tons of the vegetable per year.

Geetal Dalal, a housewife who lives in the city of Nashik north of Mumbai, said that she has cut her usual purchases by 50%. She said that until prices drop, she will buy only one kilogram of onions at market instead of the usual two.

"Since the prices have gone up, we really need to think about what to eat and what not to eat," Dalal said. "It's a real problem for us."

Related story: Are emerging market woes contained?

Economists say the runaway prices are about more than just onions -- and the drought conditions that have limited supply. The situation, they say, has been made much worse by the country's dysfunctional political system and a lack of economic reforms.

"The onion has many layers," said Veena Mishra, chief economist at the Mahindra Group. "If you look at the problems in India, they have many layers."

In the onion trade, for example, the use of middlemen is endemic, and each transaction adds to the final cost. In addition, up to 40% of the crop rots as trucks are delayed on the way to market by the poor state of the country's roads.

By the time onions reach the end consumer, the price can be double what the farmer was originally paid.

"You have deep volatility," said Shubhada Rao, chief economist at Yes Bank. "You have variability, be it in growth, be it in inflation or the most recent concern: currency."

"What the onion is doing is summing up what India as a macro economy is going through," Rao said. "We have not had a consistent policy framework regarding this segment of investment."

For things to improve, India needs to create new supply chains, along with cold storage facilities and warehouses equipped with modern technology, Rao said. Attracting more private sector investment -- especially from outside India -- would also help to improve efficiency.

Related story: India's economic growth slowest since 2009

India has been facing calls to reform its economy for years. Parliament took a key step last year by lifting restrictions on foreign direct investment. But investment dollars have not materialized and international companies remain wary of a change in the political winds that could reverse the decision.

With an election looming next year, analysts say that a political breakthrough that would speed reforms is unlikely.

Related story: Trial by fire for India's new central banker

Instead, investors have pinned their hopes on Raghuram Rajan, a University of Chicago professor and fledgling media star who last week assumed the top spot at the Reserve Bank of India.

In his first day on the job, Rajan announced reforms that should make it much easier for new banks to be licensed. He also took steps to support the rupee, including a new central bank facility to encourage commercial banks to accept more deposits from overseas.

But the central bank's ability to promote reform is limited -- and that's a problem for shoppers such as Dalal.

"We have really reduced the quantity [of onion] at home," she said. "We make a lot of Italian food. You don't need as much onion."

-- CNN's Lonzo Cook contributed reporting.

First Published: September 12, 2013: 12:47 AM ET

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Mark Zuckerberg: IPO made Facebook stronger

The Facebook founder admits he was wrong to resist going public.

NEW YORK (CNNMoney)

The Facebook (FB) CEO, famously skeptical about the merits of going public, now says the company is better off for having gone through its rocky IPO.

"I actually think that it's made our company a lot stronger," Zuckerberg said Wednesday at TechCrunch Disrupt. "We run our company a lot better now."

Investors seem to agree, and analysts are increasingly optimistic about the social media giant's prospects in mobile, which is expected to be a key driver of growth.

Shares have rallied 70% since Facebook reported second quarter earnings in late July, hitting a new all-time high of $45 on Wednesday.

"In retrospect, I was too afraid about going public," Zuckerberg said. "I've been very outspoken about staying private for as long as possible. I don't think it's that necessary to do that."

The Facebook founder even recommended the process to rival tech companies -- including Twitter.

"I'm the person you would want to ask last how to make a smooth IPO," Zuckerberg joked. "As long as Twitter ... they focus on what they're doing, I think it's wonderful."

Related story: Facebook stock finally tops $45

Zuckerberg's TechCrunch appearance was quite a reversal from last year, when he used the event to mount a defense of Facebook and his roadmap for building a profitable company.

Zuckerberg took the same stage with ease this time around, using the platform to explain some of his vision for Facebook, which now has more than 1 billion active users.

"Connecting the next five billion people is going to be harder because they may not have Internet connections," Zuckerberg said, alluding to his latest campaign, internet.org, aimed at bringing Internet to the masses.

Zuckerberg says he's also continuing to challenge himself -- part of a yearly exercise aimed at helping sustain motivation. In the past, he's started to learn Chinese and changed his eating habits.

"The point of these [challenges] is really you get perspective for building things by living in different worlds," Zuckerberg said.

This year, the notoriously introverted founder committed to connecting people online is challenging himself offline to meet a new person every day.

First Published: September 12, 2013: 2:17 AM ET

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Everbright takes a hit on trades gone wrong

China Everbright has posted an $86 million loss for August after being fingered for insider trading.

HONG KONG (CNNMoney)

Problems have continued to mount for the state-controlled company responsible for a trading glitch that sent the Shanghai Composite Index soaring 6% in a handful of minutes last month.

Everbright posted a net loss of 523 million yuan ($85.5 million) for August due to its trading error, the company said in an announcement filed with the Shanghai Stock Exchange.

Shares of the brokerage firm have lost about a fifth of their value since the Aug. 16 blunder, but were trading higher on Monday.

News of the monthly loss comes after government regulators slapped Everbright with a 523 million yuan fine last week, and banned the firm indefinitely from trading on its own account.

The China Securities Regulatory Commission said Everbright was guilty of insider trading, as the firm failed to inform investors of the electronic trading gaffe before making trades to cover its own position.

Everbright said it has since closed all of the short positions it took to offset the mistakenly placed orders, which ultimately resulted in a loss of 4.3 million yuan.

The government doled out additional sanctions last week that included heavy fines and lifetime trading bans for four executives. A fifth executive was fined 200,000 yuan. Some of those executives, including the firm's president and assistant president, have since resigned.

Related story: Fat fingers in Shanghai shake investor confidence

The company has the option to appeal to the CSRC, but hasn't yet indicated whether it will do so.

Everbright's gaffe, the largest such incident in the history since China's capital markets were established, has raised questions over effective regulation and the use of high-speed trading platforms on the exchange.

Other markets around the globe have experienced computer trading glitches. Just last month, computer malfunctions caused a trading halt in all Nasdaq-listed stocks and options for more than three hours. In April, the Dow quickly plunged 140 points after hackers managed to send an incorrect tweet about an emergency at the White House.

And in 2010, the notorious "flash crash" caused the Dow Jones industrial average to plunge nearly 1,000 points, briefly erasing $1 trillion in market value.

First Published: September 9, 2013: 12:17 AM ET

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SEC considers rule comparing CEO pay with workers

Oracle CEO Lawrence Ellison made $96.1 million in 2012, suggesting his company may be among those reporting a large pay gap between his and typical worker pay at Oracle. The SEC is working on a rule forcing all companies to disclose such pay ratios.

WASHINGTON (CNNMoney)

Soon, the SEC might require those companies to say how those salaries compare with the folks who work for them.

Although it's not clear when the SEC will finalize its proposal, the decision is expected soon. After that, it might take another year to implement.

The rule is a result of the Dodd-Frank Wall Street reforms of 2010. But little progress has been made, partly because the rule lacked a deadline and partly because big companies lobbied against it.

"It's long overdue, and of the 400-plus rules from Dodd-Frank, it's the simplest," said Bartlett Naylor, financial policy advocate for Public Citizen, a consumer advocacy group.

Companies say it's not so easy. Nearly two dozen groups and associations -- including those representing the petroleum, retail and financial services industries -- sent a letter to the SEC in 2012 complaining about the "significant hurdles and burdens " of collecting such information. They also say it's not useful to investors.

One big hurdle they complain about: Collecting pay data for employees overseas.

"Companies have no business purpose to collect that information globally," said Tim Bartl, president for the Center on Executive Compensation, which represents top corporate officers at the nation's largest companies.

But proponents of the plan say companies could virtually ignore overseas employees, due to the way the SEC intends to have companies report median employee pay.

The SEC is leaning toward directing companies to take a statistical sample of workers in the middle of the pay scale, Director of Corporation Finance Keith Higgins said in an August speech.

Such statistical sampling would virtually ignore most global employees, because "Chinese workers aren't anywhere near the midpoint," said AFL-CIO Office of Investment chief research analyst Vineeta Anand.

Still, it could be pretty embarrassing for companies.

While median wages aren't known for each company or industry, the average wage for all kinds of U.S. workers was roughly $43,000, according to Bureau of Labor Statistics August data.

That puts Oracle's Ellison's pay at 2,236 times the average worker's pay, Exxon's Tillerson at 936 times the average worker pay and Wal-Mart's Duke at 481 times the average worker pay.

Wal-Mart spokesman Randy Hargrove noted that Duke's compensation is in line with CEOs at similar companies. For example, Target (TGT, Fortune 500) CEO Gregg W. Steinhafel also made $20.6 million.

Neither Hargrove nor Exxon spokesman Alan T. Jeffers would comment on the SEC rule. Oracle didn't return a request for comment.

First Published: September 9, 2013: 2:45 AM ET

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Apple looks to regain footing in China

HONG KONG (CNNMoney)

The country of 1.3 billion is Apple's largest market outside the United States, but the iPhone maker has stumbled there, losing ground in the smartphone race to rivals that offer cheaper phones sold through the country's most popular wireless carrier.

Apple's sales in China, Hong Kong and Taiwan fell by 14% in the third quarter, a sharp reversal from 8% growth in the prior quarter, and a gain of 67% before that. The lackluster performance puzzled analysts, and even CEO Tim Cook admitted that "it's not totally clear" why sales were so slow in Hong Kong.

"I continue to believe that in the arc of time here, China is a huge opportunity for Apple," Cook said in July. "I don't get discouraged over a 90-day cycle that can have economic factors and other things in it."

Yet Apple (AAPL, Fortune 500) is now looking to reverse the slide, and if the hints leaking out of Cupertino are any indication, the company may announce two significant steps before the week is out.

Apple is expected to unveil a slate of new products Tuesday in California, including the iPhone 5C, which analysts say is likely to cost about $400 and be built with a plastic case. At current prices, the iPhone is considered a luxury item in China, and well beyond the reach of many citizens.

Related story: Apple's innovation problem is real

The company has also scheduled a media event for Wednesday in Beijing -- an unusual step that has sparked speculation about a possible deal with China Mobile.

China Mobile is the world's largest wireless carrier, and Apple has tried unsuccessfully for years to reach an agreement that would bring its iPhones to the telecom's 700 million subscribers.

China Telecom and China Unicom currently offer iPhones to their customers. Between them the two smaller carriers have about 425 million subscribers.

While Apple has said little publicly about a potential China Mobile deal, the Wall Street Journal has reported that Apple is preparing to ship new iPhones to the carrier. The new potential customers and a cheaper phone could help Apple claw back some of the market share it has lost in recent years.

Apple has less than 5% of the Chinese smartphone market, and the iPhone ranks behind Samsung and a host of local brands, including Lenovo, Xiaomi, Huawei and ZTE.

Related story: China's Xiaomi looks abroad

Apple still has plenty of growth potential in China. The company, for example, has only 11 bricks-and-mortar stores in China and Hong Kong -- something Cook is planning to change.

"We are continuing to invest in retail stores here and will open many more over the next several years," Cook said during a January visit to China. "We have some great sites selected, our manufacturing base is here, and we have incredible partners here."

After this week, the CEO might be hoping for a few more customers as well.

First Published: September 9, 2013: 3:30 AM ET

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Merrill agrees to $160M racial bias settlement

Merrill Lynch has agreed to pay $160 to settle an employment discrimination class action suit, according to the plaintiff's attorneys.

NEW YORK (CNNMoney)

The settlement, one of the largest ever in an employment discrimination case, would set up a pool of money to be divided among an estimated 1,200 current and former brokers at the firm, according to Suzanne Bish, one of the partners at Stowell & Friedman, the Chicago firm that brought the case in 2005.

Lawyer fees will be no more than $40 million of that settlement amount, Bish said. The federal district court has yet to consider or approve the proposed settlement.

The brokerage firm, a unit of Bank of America (BAC, Fortune 500), would not confirm the settlement.

"We are working towards a very positive resolution of a lawsuit filed in 2005 and enhancing opportunities for African-American financial advisers," said spokesman Bill Halldin in the firm's only comment.

The suit was a uphill battle for the plaintiffs, who had a district court, court of appeals and U.S. Supreme Court all refuse to certify a class of plaintiffs at several points along the way.

At the time the suit was brought, Merrill Lynch was an independent firm led by a black CEO, Stan O'Neal. In his deposition in the case, O'Neal denied there was any discrimination by Merrill Lynch and suggested that black brokers earned less than white brokers because white Americans have more wealth than African-Americans and were more comfortable trusting their investments with white brokers.

It wasn't until February 2012, more than six years into the case, that a court of appeals first certified the class action on behalf of African-American brokers at the firm. Merrill Lynch then appealed that decision but could not get a hearing before the Supreme Court. The case had been scheduled for a January 2014 trial date before the settlement.

Coca-Cola (KO, Fortune 500) agreed to pay $192.5 million in a settlement in 2000. And Texaco agreed to a settlement valued at $176 million in 1996. Bish said subsequent court decisions have made large employment discrimination settlements more difficult to win since those earlier cases.

First Published: August 28, 2013: 2:45 PM ET

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