As the third quarter drew to a close, Twitter Inc. (NYSE: TWTR) posted the worst performance of stocks that are part of the S&P 500 index. Its shares fell 35% for the period.

Twitter has been hurt because it is one of the largest social media companies. Along with Facebook, it has suffered accusations of being a conduit of hate speech, fake accounts used to influence election results and perhaps sex trafficking. This has led to a set of aggressive government investigations, which in turn may trigger regulation. Regulation could cause Twitter members to think their free speech rights will be compromised. Twitter membership has not been growing. If membership numbers decline, any hope that Twitter might be a major tech growth firm would disappear.

In the most recently reported quarter, monthly active users were 335 million, down slightly from 336 million in the immediately previous quarter. While revenue rose 22% to $711 million, advertisers may flee the company because of the controversies. That, in turn, will make the shares even less attractive.

Twitter management posted disappointed forward guidance:

For Q3, we expect:

• Adjusted EBITDA to be between $215 million and $235 million

• Adjusted EBITDA margin to be between 33% and 34% • Stock-based compensation expense to be in the range of $85 million to $90 million

For FY 2018, we expect:

• Stock-based compensation expense to be in the range of $300 million to $350 million • Capital expenditures to be between $450 million and $500 million

Note that our outlook for Q3 and the full year 2018 reflects foreign exchange rates as of July 16, 2018.

Twitter’s regulation problems can only make those numbers worse.

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