Restrictions Expire On Stock Trading For Twitter … – Bidnessetc

ByLarry Darrell company, costolo, facebook, factor, faith, ipo, management, market, short, williams Comments Off

Twitter Inc.’s (TWTR) insiders and early backers finally have the option to relinquish their stakes in the company as the ‘lockup period’ – a 180-day restriction imposed on selling Twitter stock on certain classes of shareholders – has expired today. The expiration makes nearly 480 million shares eligible for sale, which equals nearly 83% of the basic outstanding shares issued by Twitter.

Unlike the early backers of Facebook Inc. (FB), who together accounted for more than half of all Facebook shares sold on its IPO, Twitter’s initial investors had not been allowed to sell their stakes immediately after the company went public. The lockup restrictions were in place for even Facebook insiders, though. However, even though they no longer face restrictions on selling their stakes, Twitter’s insiders and early backers have said they still do not intend to sell.

Twitter cofounders Evan Williams and Jack Dorsey, and CEO Dick Costolo have said in a filing that they do not have any ‘current plans’ to sell their holdings. Williams owns a 9.4% stake in Twitter, Dorsey owns 4%, and Costolo owns 1.4% of the company. Twitter insiders collectively control nearly 46.6% of the company; if they do not sell either, no new stock will enter the market.

Investment firm Rizvi Traverse Management LLC, the largest shareholder in Twitter, owns 14.4% of the company. It does not intend to sell either, according to industry sources. Other backers have also vowed not to sell, and seem instead to have reiterated their faith in the microblogging service, whose stock price has shed more than 36% of its value this year.

Ever since it reported slow growth in its user base in the last quarter of 2013 and the first quarter of 2014, Twitter has become a frequent target for restless investors. The company’s stock price declined by more than 20% when fourth quarter fiscal ‘13 earnings were released, and by more than 12% when first quarter 2014 earnings were announced.

Whether Twitter’s price will decline following the expiry of the lockup period is yet to be seen. When Facebook’s lockup period expired, its stock price was already trading below its IPO price, which gave shareholders lesser incentive to sell. However, Twitter’s stock price is currently 50% higher than its IPO price, and it will be interesting to see how stakeholders will react after restrictions are lifted. Facebook had fallen 6.4% when the first batch of its shares had become eligible for sale.

Another factor that will be on Twitter investors’ minds is the recent selloff in the tech space. The Nasdaq 100 declined nearly 3% after the most intense session in the recent selloff – its largest single-day decline since November 2012. It took down companies like LinkedIn Inc. (LNKD), which is currently down nearly 30% year-to-date, and Yelp Inc. (YELP), which is down 12%. Facebook, however, weathered the storm well and is still up 13%.

Lockup expirations are usually followed by a period of volatility and draw the interest of short sellers. Twitter has a short ratio of 3.78 as of April 15, 2014, which means it will take short sellers nearly 3.78 trading sessions to cover their positions at current volumes.

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Restrictions Expire On Stock Trading For Twitter … – Bidnessetc

Author

Larry Darrell