Twitter in Trouble?
Analysts are alarmed at the sudden fall of Twitter’s stock over the past 2 weeks. Twitter’s shares have plunged by 27 percent this month. They plunged by 6 percent last Friday when Salesforce.com ruled out acquiring Twitter.
Twitter investors have been hurting pretty deeply and the fall in the value of Twitter’s stock is bad news for its employees. That’s because Twitter relies on stock-based compensation as a way to pay employees. In fact, stock benefits for employees comprises of 18% of Twitter’s revenue or $682.5 million, which is a record for such a large company in the Silicon Valley.
As of today, Twitter has been trading at 35% below its IPO price. This has deeply affected employee morale at Twitter. According to the company review site Glassdoor.com, only 54% of Twitter’s employees have a positive view of the company’s business future.
Salesforce is just the latest company to say “no” to acquiring Twitter. Major companies such as Alphabet (Google), Disney and Apple have already rejected any idea of taking over Twitter, which they see as a deeply troubled business.]
Salesforce CEO Marc Benioff said he ruled out a bid for Twitter because of his concern that the social platform was completely taken over by trolls and there was too much online abuse on Twitter.
Top stock analyst Jim Cramer of CNBC said, “Whats happened is, a lot of the bidders are looking at people with lots of followers and seeing the hatred.”
“Twitter says listen, we have a filter. I mean the filter filters out a very small amount of the haters, and I know that the haters reduce the value of the company,” he added.
Brian Wieser, an analyst at Pivotal Research Group, who is a major supporter of Twitter said he still had a “buy” rating on the stock and was still optimistic about Twitter’s future, provided it was taken over by a major corporation. “If they believe in the company, they have to believe the stock is cheap, in which case they know the next issuance will provide value,” Wieser said.
Actor and major tech investor Ashton Kutcher is another of those who has reservations about investing in Twitter. Kutcher said he wanted to invest in Twitter’s earlier days, but not now: “I most definitely wanted to invest, I just didn have an opportunity to do so.”
“I think whats happened over time is the platform went from being a one-to-one, one-to-many, one-to-few communication platform and sort of turned into more of a media platform that was like a headline dictator or just a place where people are sort of pushing whatever product they e trying to sell,” Kutcher said.
Kutcher is a top investor in companies such as Skype, Square and Foursquare. He said, “Twitter needs to release some numbers on their user engagement and their churn and get some ground stability relative to what their product is; and I think that those companies would be a lot more interested.”
As of today, the Twitter share price is $16.73 and its market capitalization just $11.23 billion.
Author: Raghav Hegde – India