Twitter Short Interest Plunges

By Douglas A. McIntyre Updated Jan 12, 9:16AM EST · Published Aug 10, 6:45AM EDT

Follow 24/7 Wall St. on Google

This post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive compensation for actions taken through them.

Twitter Short Interest Plunges — © Thinkstock

Shares sold short in Twitter Inc. (NYSE: TWTR) dropped by 8.3 million shares to 51.8 million for the period that ended July 31. The move comes as Twitter’s shares have collapsed after its earnings report. In the past month, the stock price is down just over 10% to $16. Twitter’s short interest is a substantial 8% of its float.

Twitter’s shares have been pulled in two directions in the past year. The force that has driven them higher is speculation that the company might be taken over by another firm that wants its 300 million users. However, no real offer has materialized, perhaps because Twitter has been unable to make money from the huge user base despite the company’s ubiquity as a means for the communications of famous people, which include the U.S. president.

The bad news about Twitter got worse as it announced earnings, which is the primary downward pressure on the stock. Twitter announced:

The company posted second quarter revenue of $574 million, a decrease of 5% year-over-year. Quarterly GAAP net loss was $116 million, representing a GAAP net margin of (20%) and GAAP diluted EPS of ($0.16). This compares with a quarterly GAAP net loss of $107 million, representing a GAAP net margin of (18%) and GAAP diluted EPS of ($0.15) in the same period last year.

[nativounit]

Average monthly active users rose only 5% from the same period the year before to 328 million. Twitter’s forecast for the third quarter was also disappointing:

Adjusted EBITDA to be between $130 million and $150 million;
Adjusted EBITDA margin to be between 25% and 26%; and
Stock-based compensation to be between $100 million and $110 million.
Additionally, for the full year 2017, Twitter expects:

Total non-GAAP expenses to be down 3% to down 6%, compared to full year 2016;
Stock-based compensation to be down 25% to down 30%, compared to full year 2016; and
Capital expenditures to be between $300 million and $400 million.

The fact that the short interest moved the way it did is counterintuitive. However, the number of shares sold short in relation to the float is not.

[recirclink id=407372]

[wallst_email_signup]

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.