Investors on StockTwits.com prepared for the worst ahead of Tuesday's share lockup expiration. Starting tomorrow, Twitter insiders will be able to sell 480 million shares that were previously restricted.
The amount of shares that will be eligible for sale dwarfs the 80 million shares investment banks sold to the public in the IPO. As a result, if many insiders sell tomorrow, Twitter's share price could plummet.
The stock climbed half-a-percent by 3 p.m. Monday. The rise was, in part, due to enthusiasm over a deal between Twitter and Amazon (AMZN) to enable Twitter users to add items to their Amazon cart, for purchase later, without leaving Twitter. Sentiment on the stock, however, is 52% bearish, according to StockTwits analytics.
@HeadandShoulders ... Don't read anything into today's activity. Everybody is holding their breathe and WAITING TO EXHALE tomorrow-- George (@gmfischer71) May. 5 at 01:28 PM
The way a majority of Twitter commenters sees it, shares of the micro-blogging social network are heading lower. What remains to be seen is if shares fall abruptly due to rampant selling or slowly over the next few weeks.
$TWTR...expecting a dribble lower & lower in coming weeks. Cause will be dismissed as "markets are weak". All bs as insiders sell sell sell.-- Morpheus (@Morpheus) May. 5 at 02:43 PM
Twitter's biggest shareholders have said they will not sell tomorrow. Twitter co-founders Jack Dorsey and Evan Williams, along with CEO Richard Costolo, have no plans to sell common stock, according to an April 14 regulatory filing. Benchmark Venture Capital Funds also does not plan to sell or distribute stock after the lock expires. The group holds more than 205 million shares.
However, investors predict that many other funds and employees will sell.
$TWTR Like FB ipo, there's multiple pvt equity firms that own TWTR in the single digits. Are THEY on board with Costolo's no sell.? (no)-- jim mckee (@DanDaMan) May. 5 at 01:49 PM
There's just not enough reason for insiders not to take profits, say StockTwits investors. Twitter trades at 156 times expected 2015 earnings. That's a higher multiple than other social networks such as LinkedIn (LNKD) and Facebook (FB).
Shares have been on a downward trajectory since February. They are roughly 47% lower than Twitter's all-time high of $74.73. And Barron's came out with an article over the weekend arguing that shares have further to fall. Barron's main argument is that Twitter is too pricey given its slowing user growth.
To be sure, some investors argue that Twitter might actually go up tomorrow. The high percentage short interest in the name could lead to a squeeze if the anticipated deluge of insider selling doesn't happen. Short-interest on the stock is 14% of float, according to shortsqueeze.com.
$TWTR does not have to sell off u know. Twitter may trade up even after a sell off due to the huge amounts of shorts in the name.-- H&S (@HeadandShoulders) May. 5 at 12:04 PM
But many more investors anticipate that Twitter insiders will shed shares, if for no other reasons than to pay off taxes.
$TWTR insiders wanted to start a squeeze they just don't sell....but I'm sure many will want to take some profits..need to tax man-- RJ (@ryjo) May. 5 at 01:55 PM
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At the time of publication, the author held no positions in any of the stocks mentioned.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.