As if the hit they took after reporting Q1 one earnings wasn’t enough, the little birdies at Twitter are having another rough day. Shares of the company’s stock are down 17% today, falling to an all-time low today of $31.85.
At least part of today’s fall is due to the expiration of the company "lock-up." Now that they have been trading publicly for 180 days many employees who until now were not allowed to sell their shares are doing so. It amounts to potentially 80% of the company's stock.
While many big investors and stakeholders are less likely to be selling today, it doesn’t bode particularly well when your employees look to cash out and jump ship. That said, this is nothing new. It happens in some form when just about any lock-up, especially those for a hot growth company, expires.
Jeff Macke and Yahoo Finance interactive editor Phil Pearlman dug a little deeper into the company's issues. "They had the successful IPO based...in part on that low float and now just a ton of shares coming available to sell," says Pearlman. "You had this huge run-up into the end of the year," he notes, "then you've had this monstrous selloff as all the momentum names from 2013 got killed, and now you have a situation where you have this huge downtrend. Now some people will say that part of that downtrend was anticipation of this lock-up and so the day when the lock-up ends becomes an incredibly important day...there's really no way to gauge that bottom."
With no way to measure a bottom what does that mean for the stock in terms of a buying opportunity? Pearlman's take:
Longer term, this wreckage might create opportunity. At some point, there will be over-reaction in the direction of the trend and then, for those who want to hold long term and believe in the company, that’s where you get opportunity. Still, Twitter has some significant problems including new user growth, the on-boarding process, as well as fixing and monetizing search, that require killer execution from the Twitter team.
Pearlman also notes that there is some level of support around $26 a share, the price the big institutional investors bought in at last November when the stock went public.
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