×
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.

Popular on Variety

More Digital

  • MINDHUNTER

    Netflix's Podcast Slate 'Deepens' Space Around Original Content, Programmers Say

    It should come as no surprise that, in its quest to become a full-blown entertainment ecosystem, Netflix has built a roster of podcast programming to complement its scores or original series and films. The programs recruit top talent and hosts to hang out and talk about the streaming giant’s TV and film content. It’s a [...]

  • Netflix-logo-N-icon

    Netflix Is Testing Human-Curated 'Collections'

    Netflix, a company powered by the strategic use of data, relies on artificial intelligence to suggest new content that its streaming customers are likely to be interested in. Now it’s looking to potentially add a human touch: The company has launched a limited-scale test of “Collections,” a new feature that presents groups of movies and [...]

  • wolves in the walls emmy

    Neil Gaiman VR Experience 'Wolves in the Walls' Wins Primetime Emmy

    “Wolves in the Walls,” the virtual reality (VR) experience based on Neil Gaiman’s children’s book by the same name, has been awarded with a Primetime Emmy for outstanding innovation in interactive media. The experience has been produced by San Francisco-based immersive entertainment startup Fable, which puts a big effort on making the viewer a participating [...]

  • The Void San Francisco

    The Void Teams Up With Sony Pictures for New Location-Based VR Experience

    James Murdoch-backed virtual reality (VR) startup The Void has teamed up with Sony Pictures Virtual reality to produce a new location-based VR experience, according to Curtis Hickman, the startup’s chief creative officer. Hickman revealed the partnership in a conversation with Variety this week, during which he also outlined plans to bring more original IP to [...]

  • US President Donald J. Trump speaks

    Apple Stock Down 4.6% After Trump ‘Orders’ Companies to Leave China

    Apple’s share price was down around 4.6% Friday at the close of the market, to $202.64 per share, after President Trump took to Twitter to “order” U.S. companies to leave China. The slide came amid a market-wide sell-off, with the NASDAQ sliding 3%, and the Dow dropping 623 points. Trump’s edict was a response to [...]

  • Former head of CAA China Peter

    Peter Loehr to Spearhead Asia Expansion of Genies Avatar Venture (EXCLUSIVE)

    Peter Loehr, the former head of CAA in China, and seasoned music executive John Possman have been tapped by digital avatar company Genies to lead its expansion into Asia. The company’s proprietary avatar technology allows users to express ideas, thoughts and feelings in a different way from text, audio and video. Within the app and [...]

More From Our Brands

Access exclusive content