You will be redirected back to your article in seconds

What Twitter’s Stock Slide Really Means

Hardly a day has gone by this week without new horror stories about Twitter’s stock. It reached a historic low on Monday, only to be lower on Tuesday, and then again Wednesday. On Thursday, it was briefly in free-fall, only to recover by the close of the market. And on Friday, it promptly nose-dived again.

Here’s the good news: All of these daily updates don’t really matter, unless you are an extremely fickle investor that’s swayed by the breathless headlines of the sensationalist representatives of the business press. Many other stocks traded lower this week as well, with trends driven by energy prices, big bank earnings and other external forces.

Of course, that doesn’t mean that one should ignore Twitter’s stock price. But instead of focusing on the day-to-day rollercoaster, it’s wise to take a step back and take a look at its long-term performance. What reveals itself when looking at months, not days, is a much clearer trend – but also not exactly a pretty picture.

SEE MORE: Can Jack Dorsey’s Twitter Revolution Save the Company?

Twitter’s stock has lost more than 65 percent of its value since its high of $52.87 last April. That’s not just bad news for Twitter’s investors, it’s also putting the company under pressure on a number of other fronts, to the point where some kind of exit may be inevitable if there’s no quick turnaround is on the horizon.

Here are three reasons why Twitter’s stock performance matters beyond the daily headlines:

Talent. Twitter needs to improve its existing products and launch new products in order to regain growth and effectively compete with Facebook. To do so, it needs to retain its best employees, and attract new talent.

But times have changed in Silicon Valley, where it’s not just startups competing against each other anymore, but massive publicly traded companies like Facebook and Google as well as a growing herd of so-called “unicorns” — privately-funded companies like Uber that are valued above $1 billion, and constantly raise big new rounds to grow and expand.

In this world, it’s not just about the foosball table and the funky cafeteria anymore. Prized potential hires expect high salaries as well as meaningful stock options as part of their compensation package. A stock that’s not a success story isn’t a great bargaining chip in this context, and investors demanding a tightened belt don’t exactly help to attract and retain talent.

Takeovers. Twitter’s market capitalization is getting close to $12 billion. Anyone aiming to buy the company likely has to offer investors a significant bonus, but a takeover nonetheless becomes a real possibility if stock goes down even further. Just as a frame of reference: Facebook paid $19 billion for Whatsapp in 2014. What’s more, an ever-sinking stock also opens the doors for activist investors to buy themselves a seat at the table and push for a sale or other significant changes to the company’s direction, board or business.

Telling the story. But most of all, Twitter is fighting a perception problem. Much of the story around Twitter in 2015 has been around its public struggles, not its achievements. That’s despite the fact that the company actually got quite a bit done last year: It successfully launched its social live streaming app Periscope, grew its advertising business, and unveiled Moments as a new way to consume curated tweets at the end of 2015.

All of this was overshadowed by the overarching narrative of a struggling company. Sure, much of this noise just happens in the echo chambers of Silicon Valley as well as the tech and financial press. The average user may not care – yet. But there’s a point where perception matters to the existing and especially potential users as well. People don’t like a loser, and they’re fickle in giving new products a chance, especially if everyone tells them that those products have been built out of desperation, not hunger. Just ask Myspace. Or Yahoo, for that matter.

There is a danger for Twitter that the stock price is contributing to a vicious circle. The story about Twitter isn’t about the company’s products anymore, but its struggles. Every breathless headline about its stock price going down further contributes to this narrative — and in turn puts more pressure on its stock.

Twitter does have a small window to turn things around, but it is closing quickly.

More Digital

  • Roku headquarters

    Roku Aims to Top $1 Billion in Revenue in 2019, Beats Holiday Quarter Earnings Expectations

    Roku wants to become a billion-dollar company in 2019, and invest more in its ongoing international expansion. The streaming-device maker told investors on Thursday that it expects to generate between $1 billion and $1.025 billion this year, and that international growth was one of its key investment areas for 2019. Roku made these announcements as [...]

  • Vice Media

    Vice Media Taps Joe Simon as Chief Technology Officer (EXCLUSIVE)

    Joe Simon has been tapped as chief technology officer at Vice Media. The newly created role will include oversight of data analytics, engineering, information technology, media operations, media technology, post production, and systems management. Prior to Vice, Simon spent three years as Encompass Digital Media’s chief operating officer. Previously he held the chief technology officer [...]

  • att_logo

    AT&T Suspends YouTube Ad Spending as Boycott Over 'Pedophilia' Videos Scandal Widens

    AT&T, one month after it thought it was safe to advertise on YouTube again, said it is pulling all advertising spending from the world’s biggest video platform. The telco joins a boycott by marketers alarmed by the discovery that a secret group of child predators has been using YouTube to make sexual comments about kids. [...]

  • VR Pop-Up Opens Doors in Manhattan

    Future of Storytelling Pop-Up VR Arcade Is Coming to Manhattan

    Manhattan is getting a location-based virtual reality (VR) pop-up, courtesy of Future of Storytelling: The temporary Story Arcade will open its doors in the Starrett-Lehigh building this coming Saturday, and host a number of VR experiences, including Felix & Paul Studio’s “Traveling While Black,” Fable’s “Wolves in the Walls” and MWM Immersive’s immersive theater VR [...]

  • Amy Winehouse

    Amy Winehouse Hologram Tour Canceled Over 'Challenges and Sensitivities'

    Amy Winehouse will not be “Back to Black” in a holographic live tour after all. The late British singer, who died in 2011, was to be featured in a stage show slated to launch near the end of 2019. But the producer of the show, BASE Hologram, has indefinitely postponed plans for the Winehouse show, [...]

  • Jennifer Lopez

    Jennifer Lopez Joins TikTok App to Promote NBC's 'World of Dance'

    Jennifer Lopez is the latest celebrity to hop on TikTok, the short-form video app owned by Chinese internet giant ByteDance — more proof of the app’s growing traction, and reflective of media companies’ desire to reach its young-skewing base. Lopez had a very specific aim: to get fans excited about “World of Dance,” the NBC [...]

  • HTC Vive Announces Focus Plus VR

    HTC Vive Announces Focus Plus VR Headset With Dual 6DoF Controllers

    HTC Vive revealed its latest standalone virtual reality headset on Thursday. The Vive Focus Plus upgrades the company’s existing headset by incorporating dual six-degrees-of-freedom (6DoF) controllers, promising users the same freedom as PC VR devices. Adding the second controller will also make it easier for developers to port existing PC VR content, while making it [...]

More From Our Brands

Access exclusive content