Twitter stock dropped to $37.24 on Wednesday, half of its maximum value of $74.73 on the day following Christmas, slashing about $18 billion of its market capitalization.
The steep fall in value reflects Twitter's inability to reverse the tide and sluggish growth of its user base. The number of people using Twitter has been reducing.
This has raised questions whether it could draw 1.2 billion users as Facebook or match up rival’s potential to attract advertisers and raised doubts whether it will be able to maintain growth in the long run. No one is forecasting fate of Twitter like Orkut or Myspace. However no one can guarantee when tastes change and new rivals appear.
On the eve of its debut on November 7 on the New York Stock Exchange, the company was greeted with great enthusiasm with a rise of 73% over the offer price. The stock continued to rise for the following 2 months without justification.
Beginning mid-December, seven brokerage houses downgraded the company within a period of 3 weeks.
A common perception was that the company, though full of potential, innovative and well-run, didn’t justify such a high value, so quickly.
This week investor worries were revealed in reaction to quarterly results of Twitter, when the market noticed slower usage and user growth. Twitter's shares dropped 10%.
The stock might come under more pressure after May 5 when six-month "lockup" of Twitter will expire. “Lockup” is the period after the IPO in which early investors are prohibited to sell their shares. About 470 million shares will be exempted from restrictions.