NEW YORK - Shares of Twitter Inc sank 18 per cent 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 per cent 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 per cent 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.