(Adds closing share price)
By Gerry Shih and Supantha Mukherjee
May 6 Shares of Twitter Inc sank 18
percent to a new low in frenzied trading on Tuesday, wiping out
more than $4 billion of its market value, as early investors
sold stock in the messaging service for the first time after a
six-month "lock-up" expired.
The stock closed at $31.85 on the New York Stock Exchange,
as losses deepened late in the session to the lowest since its
debut on Nov. 7 at $37. On a consolidated basis, more than 130
million shares changed hands - 10 times the daily average volume
for the last 50 days.
The lock-up agreement that expired this week applied to
about 470 million shares, or 82 percent of Twitter's equity,
held by insiders, venture capitalists and other investors.
Twitter allowed one batch of shares to be sold in February, but
that lockup governed only about 10 million shares, most of which
were held by non-executive employees.
"The move is bigger than expected and is indicative of the
negative investor sentiment towards Twitter right now," Atlantic
Equities analyst James Cordwell told Reuters.
Tuesday's reaction to Twitter's lock-up expiry was in sharp
contrast to that of Facebook Inc in late 2012. Facebook
shares jumped 13 percent on Nov. 14 that year, when its lock-up
expiry of roughly 800 million shares did not trigger an
immediate wave of insider selling.
Twitter's shares have been trading at all-time lows since
April 29, when the company disclosed sagging usage metrics.
Indeed, concerns about user growth and engagement levels
have wiped out about half of Twitter's market value, more than
$18 billion, since late December, even as it has hit revenue
targets in the two quarters since it went public at $26 a share.
The stock does not look cheap either, despite the declines.
Before Tuesday's selloff, Twitter shares were trading at 323
times forward earnings per share, according to Thomson Reuters
StarMine. Facebook trades at about 39 times.
"I am starting to think that sentiment might have got too
negative, but I don't see anything that can turn this around in
the near term," Cordwell said.
The largest holder of Twitter shares, private equity firm
Rizvi Traverse, had no intention of selling when the lockup
expired, a spokesman for the firm said on Friday.
Rizvi Traverse, which owns about 85.2 million Twitter
shares, could not be reached for comment on Tuesday.
Lowercase Capital, which also holds a significant stake in
Twitter, said Monday it had no intention of selling its shares.
Twitter co-founders Jack Dorsey and Evan Williams and Chief
Executive Dick Costolo said in April they did not plan to sell
shares after the restrictions were lifted.
Venture capital firm Benchmark, which holds a roughly 6
percent stake, has also said it would not sell its stake.
But other major shareholders could see an opportunity to
cash out, given that none of Twitter's insiders sold their
shares during the initial public offering.
Large shareholders include venture capital firms Union
Square Ventures and Spark Capital. Spark declined to comment,
while Union Square Ventures could not be immediately reached.
Many tech companies have a lock-up clause to prevent holders
from flooding the market as soon as the company goes public.
(Additional reporting by Soham Chatterjee; Editing by Savio
D'Souza, Ted Kerr, Bernadette Baum and Richard Chang)