Twitter share price plunges to fresh low as lock-up expires

on May 7, 2014
Updated: Apr 9, 2020
Listen, Wednesday, May 7: Twitter Inc (NYSE:TWTR) plunged nearly 18 percent in yesterday’s trading as a lock-up period expired, enabling early investors to sell stock in the microblogging company for the first time since the firm’s initial public offering in November.

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Twitter’s share price closed 17.8 percent lower at $31.85 on the New York Stock Exchange, the lowest level since the IPO. The company’s stock has lost nearly half of its value since the start of the year.
The share prices of other social media companies also saw significant declines yesterday. LinkedIn Corp (NYSE:LNKD) gave up 5.7 percent to $142.33, while Facebook Inc’s (NASDAQ:FB) share price fell 4.4 percent to $58.53.

**Last straw**
Some 470 million shares, or 82 percent of Twitter’s equity, became eligible for sale after the six-month lock-up on shares held by insiders, venture capitalists and other investors, expired this week. Even though some early investors in the company, including Twitter’s largest shareholder Rizvi Traverse Management LLC, had pledged not to sell, the expiry still prompted a major selling yesterday.

Reuters reported that, on a consolidated basis, more than 130 million shares changed hands – 10 times the average daily volume for the last 50 days.
The reaction to Twitter’s lock-up expiry is in sharp contrast with that of Facebook in 2012. In November that year, the lock-up period on roughly 800 million shares in the world’s largest social media company expired, but that did not trigger an immediate wave of insider selling. As a result, Facebook shares soared 13 percent on November 14.

Facebook and Twitter have had completely different journeys after their respective IPOs. Facebook experienced a rocky public debut in May 2012, with its share price retreating from the initial level of $38. But the company managed to win investors’ confidence in 2013 by making strong progress in key areas such as mobile advertising and its stock is currently trading some 53 percent higher than the listing price. Conversely, Twitter enjoyed a strong stock market debut last November, but lost the momentum this year after its first two quarterly reports disappointed investors.

Bloomberg quoted Hudson Square Research analyst Daniel Ernst, as observing: “The lockup is the straw that broke the camel’s back.” He continued: “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.”
**Slowing user growth**
While Twitter has shown solid financial results since its float, its Q1 financial report last week indicated that the company is facing problems in attracting new users. The report revealed a continuing slowdown in user growth, which deepened concerns over whether the service could achieve widespread adoption like Facebook (Twitter share price sinks after hours despite revenue increase).
According to the report, Twitter’s average monthly active users (MAUs) were 255 million as of March 31, significantly less than Facebook’s 1.28 billion MAUs.
**As of yesterday’s US close buy Twitter shares at $31.85**
**As of yesterday’s US close sell Twitter shares at $31.85**


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