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TWITTER DOWN AS S&P RATING ON BONDS FALLS TO JUNK

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TWITTER DOWN AS S&P RATING ON BONDS FALLS TO JUNK

Nov 14 2014, 11.20am GMT

STOCK.com

Standard & Poor’s dealt a blow to Twitter shares by reducing their bonds to a junk rating.

The BB- rating is related to the $1.8bn in convertible notes Twitter issued in September.

The rating:

  • Twitter invested heavily in growth but S&P believe this may not be equivalent to the cash flow the investment makes until 2016.
  • The S&P rating assumed user and revenue growth, taking into consideration the 5% rise in users between quarters 3 and 4.
  • Raising the rating could happen if Twitter expands revenue sources through real growth rather than any new acquisitions. New products, development of international markets and improved profitability could restore Twitter’s rating.

The outcome:

  • Twitter shares fell by nearly 6%, down from 45.85 to 39.94 in 6 hours of trading today.

The response:

  • Twitter new CFO Anthony Noto talked of projection figures above analysts’ projection citing long term margins up to 40 to 45 percent, and current deals allowing it to push ads to non-account holders.  
  • Twitter stock is down 37 per cent so far this year and alongside this downgrade there is little compassion in the markets for Twitter’s investments and little confidence in the company’s growth.

Twiiter chart on MT4 showing stock deflation since S&P’s judgment.

twitter on stock.com

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