Twitter share price collapses after weak earnings report

ANDREA RICKETTI
STAFF WRITER

Twitter may be procrastinating on its potential financial gains after the company’s IPO. Statistics suggest that as of late 2013, 71 percent of online adults report using Facebook.  The number of people using the site has gone up roughly four percent since 2012, which is a relatively conducive gain.  LinkedIn is used by 22 percent of the adult population, with Pinterest close behind at 21 percent.   Twitter is used by 18 percent of the adult population, just above Instagram, which is owned by Facebook.
Investors have had  ongoing concerns about Twitter shares due to scandal that surrounds the social media platform.  In late July 2013, the U.S. stock market crashed shortly after the Associated Press’ Twitter account was hacked and a hoax tweet was sent that suggested explosions at the White House.   The Dow Jones Industrial Average dropped about 150 points in a split second, before eventually bouncing back once investors realized the tweet was fabricated.
As a result, Twitter realized it had to gain special attention to create more users and in return create more revenue. Twitter’s high stock price was called into question in the fall.  With fewer people using the site, the value of the stock began to decline.  The site anticipated a highly attractive IPO through the New York Stock Exchange in November.  Since Twitter’s IPO, there have been several red flags that have concerned investors and traders.  Twitter’s financial department has analyzed its S-1 prospectus, which is a document the company has filed through the U.S. Securities and Exchange Commission that outlines the business prior to the IPO.  Deriving from its S-1 prosepectus, Twitter has reported an overall net loss of $133.9 million for the nine month period that ended on Sept. 30, 2013.  It is evident that the company has suffered losses that may be the result of a multitude of reasons.
It is evident that prior to the IPO Twitter had a large magnitude of net losses.  As a result, the corporation tactically decided to set IPO at a high price.  The social messaging site debuted on the stock market with a $1.8 billion IPO.  On the company’s second day of trading, the stock already dwindled to $41.64 a share.  Twitter’s market capitalization, in reference to its stock price, slipped to around $22.6 billion after topping $24 billion previously.  While this may not appear to be a large drop, Twitter was aiming to avoid this.  Facebook made the same mistake by setting its IPO too high, deterring investors and traders. The CFO of Twitter, Mike Gupta, set a goal to avoid the mistake that Facebook made in May 2012.
Overall, it is safe to conclude that Twitter did not receive its anticipated revenue from the company’s IPO.  Twitter expected a rapid influx of investments, but it fell short.  While Facebook endured a similar situation, they were able to recover at a rapid speed.  The question that lies ahead is whether or not Twitter will be able to do the same.

Contact the writer:
andrea.ricketti@scranton.edu