Can Twitter, Inc. Reverse The Negative News Flow?

Shares of Twitter, Inc. hit an all-time low of $17.05 earlier today and can currently be purchased for a price of $17.16.

The company, which had traded for north of $50/share in the spring of 2015, is trapped in a black hole of negative news flow and seemingly can't escape. A new (old) CEO? The possibility of more characters in a Tweet? None of this his mattering to Twitter investors, who are finding their investments losing value by the day.

Most concerning? Shares of Twitter, Inc. are now well below their original offering price of $26/share. Companies that go public usually find it very difficult to recover if their shares sink below the original offering price - Facebook managed to do it, but many companies have never recovered after breaking that important psychological barrier.

The differences between Facebook and Twitter (the two companies are compared often) are many. To start, Facebook was able to figure out how to monetize their mobile users (who grow as a % of the user base on a daily basis) relatively quickly. Remember how much trouble Facebook was having after they went public? As soon as they figured out how to make money off of their mobile users, Facebook's fortunes completely turned around and the company now has a market capitalization of nearly $270 billion. Twitter has not been able to figure this out and shares of their company have suffered as a result.

In addition, Facebook is seen as being a much more irreplaceable part of people's lives than Twitter. While Twitter is generally used for posting unimportant nonsense (here is what I had for breakfast) and following celebrities, Facebook is used for posting family pictures, communicating with friends and planning events. For that reason, many of Facebook's users use the site on a daily basis, whether from their computers or a mobile device. Twitter, on the other hand, is seen as being much more expendable.

With Facebook, advertisers can target users using the wealth of information that the users of the site voluntarily give the company. With Twitter, however, the ads are much less targeted and, therefore, much less valuable to advertisers.

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At this point, investors in Twitter are looking for something transformative, not simply a promise to increase the number of characters that users can type in a "Tweet". Unless the company can deliver, investors in TWTR can probably expect more pain in the months ahead. Twitter bears will point out that despite the company's recent troubles, Twitter, Inc. is still worth more than $11 billion and could fall much further.

Filed under: General Market News