Bloomberg News

Twitter Falls to Lowest Price Since IPO After Lockup Expires (2)

May 07, 2014

Twitter Inc. (TWTR:US) shares fell to the lowest level (TWTR:US)since the company’s initial public offering, following the lifting of restrictions on stock sales by insiders and early investors.

The shares dropped 3.7 percent today to $30.66 at the close in New York, their fourth straight decline. Twitter plunged 18 percent yesterday even as early investors Chris Sacca and Rizvi Traverse Management LLC pledged not to sell in a sign of confidence in the San Francisco-based company.

The decline has renewed concerns that Internet stocks are overvalued and sparked a selloff (SOCL:US) in social-media companies. Before the lockup expired, Twitter’s shares had slipped this year after the company reported slowing user growth, raising concern that it may not be able to add more members. Still, Twitter trades at a level that makes it more expensive than Facebook Inc. (FB:US) or LinkedIn Corp. (LNKD:US), based on projected 2014 sales.

“The lockup is the straw that broke the camel’s back,” said Daniel Ernst, an analyst at Hudson Square Research in New York. “If Twitter’s growth was still good, if the company didn’t have such a high valuation, if its margins were better, we wouldn’t have today’s stock situation.”

About 480 million shares from insiders became eligible for sale on May 5, more than quadrupling the current amount available for trading.

Internet Plunge

Twitter’s decline yesterday was the biggest drop compared with lockup expirations from Facebook, LinkedIn, Groupon Inc., Pandora Media Inc. and Google Inc. since 2004, according to data from Bespoke Investment Group LLC. Among Internet stocks, Yelp Inc. slid 13 percent yesterday, the most since November 2012, while Pandora lost 8.9 percent, the same day that China’s biggest e-commerce company Alibaba Group Holding Ltd. filed for an IPO in the U.S. Yelp recovered by 1.1 percent today, and Pandora dropped 1.6 percent.

Trading volume was higher yesterday than it was on Twitter’s market debut. The decline has dropped the company’s value to $18.4 billion. That compares with the $19 billion Facebook agreed to pay for WhatsApp Inc., a messaging application, in February.

Twitter said last week that its monthly active users in the first quarter reached 255 million, with year-over-year growth decelerating to 25 percent from 30 percent in the previous period. Twitter’s stock is still up 18 percent from its $26 IPO price in November.

Not Selling

In total, early investors who own at least 205 million of the shares pledged to hold on their stakes. Chief Executive Officer Dick Costolo and co-founders Evan Williams and Jack Dorsey said they are hanging onto their stock. Benchmark, a venture capital firm, and Rizvi Traverse Management, whose 14 percent ownership makes it the single biggest investor, won’t sell either, people with knowledge of the matter have said. Some of Sacca’s holdings are included in Rizvi.

Social-media companies have been slipping since last week. Facebook is down more than 6 percent since May 1, while LinkedIn has dropped 11 percent and Angie’s List Inc. has dropped 8.9 percent.

Along with Twitter, those companies make up some of the biggest holdings in the Global X Social Media ETF (SOCL:US), an exchange-traded fund listed on the Nasdaq Stock Market. That security declined 2.7 percent today, the seventh time in two weeks it has fallen more than 1 percent. It’s down 23 percent in 2014 after rising 64 percent last year.

Twitter’s lockup expiration, which followed one in February for shareholders to satisfy tax obligations, was the last indicated in company filings.

“The stock has come back to earth from what were very unrealistic heights,” said Brian Wieser, an analyst at Pivotal Research Group LLC in New York who has a sell rating for the stock. “The stock does not trade on anything resembling fundamental valuation. Investors don’t generally understand the company.”

To contact the reporter on this story: Sarah Frier in San Francisco at sfrier1@bloomberg.net

To contact the editors responsible for this story: Pui-Wing Tam at ptam13@bloomberg.net Reed Stevenson, Jillian Ward


Coke's Big Fat Problem
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

Companies Mentioned

  • TWTR
    (Twitter Inc)
    • $44.13 USD
    • -1.06
    • -2.4%
  • SOCL
    (Global X Social Media Index ETF)
    • $19.78 USD
    • 0.15
    • 0.76%
Market data is delayed at least 15 minutes.
 
blog comments powered by Disqus