Twitter shares fall 10% in early trading after stock lockup period …
Twitter’s Richard Costolo, Jack Dorsey, Evan Williams and Biz Stone await the opening bell at the New York Stock Exchange on day of the firm’s IPO in November. Photograph: Lan/Corbis
Twitter shares fell more than 10% as Wall Street opened for business on Tuesday, marking the end of the lockup period that prevented executives, early investors and other insiders selling up to $20bn (£12bn) in stock following the social network’s flotation last year.
Although owners representing a large proportion of the newly tradeable shares have promised to hold on to them for now, the lockup expiry is likely to put further pressure on a stock already battered by fears of a technology valuation bubble.
Twitter’s shares are under pressure, trading at nearly half the $75 peak reached at Christmas and below the closing price on the first day of the flotation six months ago.
“This is clearly lockup related,” said the new-media analyst Brian Wieser at Pivotal Research Group. “Not every investor will refrain from selling, many of which include early employees of the company who may well want to take money off the table. Even if they don’t sell, the fear among investors will cause selling. The market is either experiencing heightened selling or anticipating it.”
Tuesday marks 181 days since Twitter’s initial public offering on 7 November, with more than 560m shares becoming eligible for sale. Investors fear that Twitter employees and early investors could flood the market with shares and crash the price by swamping demand.
In the first few hours after the opening bell at the New York Stock Exchange, shares fell by 11.6% to just below $35.
Twitter sold 70m shares during its initial public offering, but as of Tuesday many times that number were freely tradeable.
Wieser estimates there are 646m shares currently outstanding, including those sold at IPO. An earlier deadline in February allowed the release for sale of nearly 10m shares by Twitter staff below board level who needed cash to cover tax bills.
But some of the company’s biggest backers, who between them own more than 200m shares, have vowed to hold on for the time being.
Founders Evan Williams and Jack Dorsey, and the chief executive, Dick Costolo, who between them hold about 88m shares, said in April they had “no current plans to sell” once the lockup expired.
In the same regulatory filing, investment fund Benchmark, which holds 26m shares, said it would not sell “immediately after” the expiration. Rizvi Traverse Management, which has an estimated 85m, would not dump its stock immediately either, unnamed sources told Bloomberg.
Lowercase Capital, run by the former Google executive Chris Sacca, has also declared its intention to stay on board. “We have no plans to sell or distribute our Twitter shares upon the lockup expiration,” Sacca said in April. To ensure against sudden upsets, Twitter’s executives have all undertaken to follow share release plans, which last for at least one year and determine the quantities and timings of any stock exits.
These assurances should help calm investor nerves, but they cover less than half the Twitter shares released on Tuesday. There are parallels with August 2012, when Facebook shares plunged to new lows as its early backers were released from their obligations, and a total of 271m shares became available to trade.
Twitter investors were spooked last week when the company beat revenue and profit expectations but its number of users and page views grew more slowly than Wall Street forecasts.
“One of the key investor concerns on Twitter has been its ability to attract new users and to keep them engaged,” said Arvind Bhatia, analyst at the research firm Sterne Agee. “Engagement did improve sequentially but investors were looking for more.”
Twitter’s quarterly revenues reached $250m, while monthly active users reached 255 million. But year-on-year growth slowed to 25% from 30% in the previous period. Timeline views were a lower than expected 157bn for the quarter.
Twitter’s share price fell to just below $39 on Monday. The firm sold its shares at $26 apiece in the November IPO, but the stock soared during the first day’s trading, closing at $44.90.
“Many of our largest insiders and early investors have indicated that they have a long-term belief in the company and are taking a long-term view of the stock,” Twitter’s chief financial officer, Mike Gupta, said last week.
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Twitter shares fall 10% in early trading after stock lockup period …
