The Twitter IPO - Essay Example

?Accounting Theory The Twitter IPO As the news of Twitter (a social media website) being going public is revolving for some time, recently they announced that the twitter will obtain listing on New York Stock Exchange (NYSE) rather than Nasdaq.1 Most of the tech companies are listed on Nasdaq but with Twitter avoiding it sends a new wave in the news. One of the social media giants Facebook is also listed on Nasdaq but there are several reasons being put forward by Twitter for such a stance. One of the most prominent reasons for Twitter to avoid Nasdaq is the not so successful IPO of the Facebook. As many witnessed the glitches which made the Facebook suffer. There were many delays and technical problems. The systems of the Nasdaq did not go through well and it was a mess on the first day of the opening. The IPO is likely to take place late in 2013 or early 2014. The pundits are predicting figures above a billion dollars that is expected to bring in about for the social network website. There are several other factors for such decision. The trend of tech companies is quite high and many are thinking of a potential listing. Twitter also considers this a great time when the trends are hot and looking to avail such opportunity. A return of 28% has been recorded for tech IPOs this year and is the second best after the 51% of the health sector as being reported by morning star. As Paul Brad, an analyst with Renaissance Capital states tech companies are one of the strongest areas of the IPO market to date.2 Such decision is also likely to have impact on the wide range of stakeholders of the Twitter. This could well be related to the Legitimacy Theory which states that organizations take influence of their social and external environment (Tilling). This could well be seen here as Twitter also follows the social norms, beliefs and values that are currently prevailing in the industry. Many tech companies are trying to obtain listing. So does Twitter follow the footsteps of them and one of the influence or inspiration could be the IPO of the Facebook. The writer suggests that there are basically two levels of the theory; one is institutional level which involves government and other bodies in a wider context and the other one is organizational level in which the companies such as Twitter falls (Tilling). At this level organizations try to seek approval from the society in pursuit of their own goals. However, if they succeed they remain in existence otherwise they face dire consequences and fight for their survival. Once organizations expand and their operations become widely spread and they get acceptance from the society, there comes another responsibility on them. This can be of relevance with the Stakeholder Theory. The theory suggests that the vary existence of organizations is to create value for their shareholders over time.3 If setting aside the other ethical obligations of an organization; the core objectives of the organizations are to maximize the shareholders’ wealth. But then comes a range of stakeholders with different set of goals and expectations. It is the duty of the organizations to keep a balance between such stakeholders (Reynolds, Frank and David, 2006). Twitter here is also expanding its stakeholder on a large scale now. From previously, their main stakeholders were only the users of their website but now upon obtaining listing they will have the responsibility to serve a wide range of stakeholders. From shareholders to users to wider society at large. They will also be liable to some ethical practices and transparent disclosures. Latest acquisition of Staples In the latest news, it has been reported that the Staples has acquired Runa, a San Mateo, California based Start-up Company whose business is specialization and personalization in e-commerce technology.4 The biggest factor of such a decision was that Staples wanted to boost up its on-line sales in order to compete with Amazon and other tech advanced companies in the e-commerce space. The chairman and CEO of Staples, an office supplies retailer gave a statement that Runa has an idiosyncratic platform and great experience in e-commerce and on-line market industry. With such an acquisition we will be able to give our customers better services with features such as customized orders, estimates and on-time deliveries, all in real time. One of the reasons of such an addition to Staples portfolio was also that they wanted to grow better in terms of their technological base; therefore they maneuvered towards a technology shift. Staples will be able to get benefits of the latest softwares of Runa such as PerfectOffer and PerfectShipping, which provides real-time deliveries, personalized orders and also provides delivery time estimates respectively. The offices of Runa will also be merged with Staples and their employees will also join hands with Staples. Runa has also previously partnered with eBay and Rovio Entertainment, the creators of Angry Bird franchise.4 This decision can well be related to different accounting theories. Firstly, the institutional theory which gives detailed reflections upon the social structure. It suggests that the processes; by social norms, beliefs, procedures and rules become authoritative and well established for the behavior of the organizations (Scott, 2004).There are different aspects which researchers suggest that how over the period of time such cultures are adopted and diffused and at some instances later in the point they also get dumped and gear an organization towards decline. Here this is relevant in terms that Staples went for a process to obtain growth that is often termed as a procedure to obtain growth pretty quickly, the acquisition of another company. But it mostly involves high cost premiums to be paid over the existing cost. The main problem with acquisitions is also of the cultural mismatch. What happens is it sometimes it gets even impossible to merge to organizations in one due to greater differences in the culture and work practices of the both, therefore demise in inevitable. However, contingency theory states that it is all dependent on a wide range of factors. Nothing works as a thumb rule. There are always different factors for every organization and it is all situational. One size not necessarily fits all. There are many factors that need to be look for such as external environment, strategies and mission, technology, firm interdependence, business units, knowledge base and other relevant factors.5 The stakeholders are also affected by such decision and they can be looked under the stakeholder theory which has been aforementioned. Now, Staples must provide clear justification for such an acquisition. Whether relevant synergy is obtainable or not, there must be strong reasoning for that. There may exist some grievances amongst the employees; previous employees would not welcome such an acquisition open-heartedly and prospective employees may not like the new culture as change is mostly difficult to implement and accept. Reservations of both the groups must be satisfied in order to obtain fully the synergistic benefits of a successful acquisition. The second group is of customers of the Staples who for sure will get greater service and will enjoy the fruit of such technological features and acquisition (Reynolds, Frank and David, 2006). Conclusion Both of the decisions will have no doubt a great impact in the both the businesses in terms of work practices, management, culture, administration and revenue and expenses which is the basic reason for conducting any business to enjoy higher profits. However, in the pursuit of such objectives one has to take such strategic decisions of important nature. But companies now-a-days are getting much more conscious in terms corporate social responsibility, therefore while in attainment of such economic benefits, care must be taken in to account of factors such as social welfare and conservation of environment. Although, there are no specific guidelines or prescribed rules that any organization needs to follow or can adopt. But on the contrary there are some best practices, theories, role models or work principles that any organization can adopt (Tillling). Care must be taken that these are just best principles that are implemented in certain industries or sectors and when they worked successfully researchers published them or theorized them. So, while contrasting them to your own organization, one’s own situational factors or circumstances must be kept in mind (Scott, 2004). Therefore, they can be molded as per situation demands; they act as a reference points. What organizations mostly do is that they do not consider their own circumstance and blindly try to implement these best practices which are not recommended. The reason put forward for this by researchers and analyst is that they must consider the context surrounding their own environment (Dr. Schoech, 2006). It is however observable that the above discussed decisions are somewhat influenced by best practices and principles. In the case of Twitter it can be seen that they learnt from their environment and took decision accordingly. They did not simply follow the industry trends and decided to obtain listing on Nasdaq where most of the tech companies are listed. This can be portrayed as a good example to follow that organizations must learn from their environment and try to fit accordingly in their context. Similarly, Staples also followed the prevailing trends of techno equipped companies and also decided to introduce latest technologies in its own business. However, it is not clear at present that whether they will succeed in this or not but one thing is clear here that organizations do tend to follow the trends and take influences from its surroundings. Therefore, care must be taken and context of implementation must be kept in mind as the researchers theorize and suggest. Bibliography Adil Abbasi “Contingency Theory in Management Accounting.” Internet. Available from http://accountingfinancestudentsinn.blogspot.com/2011/02/contingency-theory-in-management.html, accessed 3 October 2013. Andrea Huspeni “Staples look to get personal with latest acquisition”. Internet. Available from http://www.entrepreneur.com/article/228696, accessed 3 October 2013. Brian Patrick Eha “Report: Twitter to list on NYSE, Fearing IPO mishap on Nasdaq”. Internet. Available from http://www.entrepreneur.com/article/228557 , accessed 3 October 2013. Benjamin Pimental “Twitter going public as tech IPOs heat up” Internet. Available from http://www.marketwatch.com/story/twitter-going-public-as-tech-ipos-heat-up-2013-10-02, accessed 3 October 2013. Dr. Schoech, “Contingency Theory”. UTA School of Social Work 2006 Internet. Available from http://lexicon.ft.com/Term?term=stakeholder-theory, accessed 3 October 2013. Reynolds, Scott J., Frank C. Schultz and David R. Hekman. “Stakeholder theory and Managerial decision-making”. Journal of Business Ethics 2006: 285-301. Scott, W. Richard, “Institutional Theory: Contributing to a Theoretical Research Program.” Great Minds in Management: The Process of Theory Development. Oxford University Press. August 2004. Tilling, Mathew V., “Refinements to Legitimacy Theory in Social and Environmental Accounting.”Flinders University, South Australia. Read More