Tuesday, 6 May 2014

Twitter shares are taking a bath. Negative sentiment.

Twitter continues to take a bath.

More than 120 million shares were traded on Tuesday with a price fall of -18% down to under 32 us dollars a share - an all time low. It's up on the 26 us dollar November IPO price but well down on the post IPO surge of over 70 us dollars.

It's a slide but accentuated this week by the expiration of 'lockups' in shares with 470 million available to come onto the market for the first time.

The co-founders, CEO and large investors have indicated that they'll continue to hold the stock...but for how long? They hold about 205 million shares - leaving circa 265 million available to possibly trade and 120 million were.

Tuesday's volume in traded shares though, is an all time high and indicates large stock offloads. Less that 20% of Twitter shares had been traded to this point.

Twitter are suffering from a general downturn in tech stocks but in particular, it is driven by concerns that Twitter hasn't found a way to generate substantial revenue - yet. And monthly active users are down. Negative sentiment.

That concern is at the core of this. As well as, legal or not, probable market short selling which will in turn create a downward dynamism in the share price.... possibly.

Add to that, those staff holders of shares who have an opportunity to "get rich" following the release of their shares from the lockup, will be nervous of these drops and possibly, look to sell, rather than wait. Further adding to the decline.

Not a good time for Twitter.

But fundamentally it shows that an IPO has benefits especially for tech companies. However, there's also a darkside. It can ruin you.