Poor earnings, questions about whether its business model can be sustained and analyst downgrades have already cost Twitter Inc. (NYSE: TWTR) shareholders billions of dollars. Now, short sellers have decided Twitter’s plunge has not ended.
Short interest in Twitter rose from 46.7 million on April 14 to 50 million on April 30. A more important number is the percent of Twitter’s float which is sold short–an extraordinary 19.5%.
No matter what Twitter’s financial sins have been, there is still an army of people who believe that, with 300 million users, it cannot help but be successful. Skeptics, on the other hand, argue that the revenue that these users yielded in the last quarter–$250 million — is almost meaningless in comparison to 300 million.
One of the endearing thing about some short sellers is the lengths to which they will go to push down a stock’s price so that they can make money. Twitter has given them plenty of ammunition. The short sellers are undoubtedly whispering negative opinions into the ears of other large investors, analysts, and the press. Whatever the source of information, Barron’s wrote a very negative article about Twitter a week ago. It was filled with evidence that, even after a horrendous sell-off, Twitter’s shares were overvalued. So, Twitter fell 17.9% this past week to $32.05, on top of a 6.2% decline the week before.
READ MORE: Most Shorted NASDAQ Stocks
Twitter has the unpleasant distinction of being large enough and visible enough that short sellers are willing to take a big position in its shares. That position can only be a headwind for Twitter, which can be added to the large number it already has.
Twitter needs a major piece of good news to take back momentum. Usually, this kind of news happens when earnings are announced. That is more than two months away. Twitter needs to pull a rabbit out of its hat in the meantime. Or, short sellers will savage the shares in greater and greater numbers
READ MORE: Most Shorted NYSE Stocks
Find a Qualified Financial Advisor (Sponsor)
Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to 3 fiduciary financial advisors in your area in 5 minutes. Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests. If you’re ready to be matched with local advisors that can help you achieve your financial goals, get started now.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.
Latest from 24/7
