NEW YORK (TheStreet) -- Turns out Twitter (TWTR) insiders wanted out. Twitter opened 7% lower Tuesday morning after selling-restrictions expired on 480 million shares granted to company employees and pre-IPO investors.
$TWTR An old Water hose works fine until u turn ip the pressure then it bursts-489.000.000 shares is a lot pressure-? Daniel Harris (@MYBOYFRESH) May. 6 at 09:03 AM
The so called "lockup expiration" was long forecast and a majority of investors on StockTwits.com had warned that many insiders would likely choose to sell a significant portion of their holdings -- even if Twitter's cofounders, CEO and other large stakeholders did not sell a single share, as promised.
$TWTR Smoked pre market. There's no one who can absorb the type of supply being dumped right now. How was anyone bullish on this yesterday?? Gh0stTrade515 (@Gh0stTrade515) May. 6 at 08:52 AM
StockTwits' users saw -- and still see -- three reasons for Twitter's fall. Twitter trades at more than 155X expected 2015 earnings, a higher multiple than other social networks such as Facebook (FB) and LinkedIn (LNKD). Twitter's multiple is particularly high given its declining user growth. That's one reason Barron's recently called the stock overvalued.
$TWTR is showing her true colors in bright shades of RED but for many, no big surprise. Blood letting programs hitting the bid.? JMar (@Sliver) May. 6 at 08:55 AM
Also, Twitter insiders have watched their paper worth deteriorate by about 47% since February, when the stock hit an all-time-high of $74.73. So it's understandable why some insiders would want to lock in profits rather than risk their whole stake losing more value in the near term.
And the tax man cometh. Some twitter holders might have wanted to sell if, for no other reason, than to pay their tax bills. Taxes were due last month, but they'll come around again. And Twitter users might have wanted some extra capital after paying their bills.
The big question on StockTwits' Tuesday morning was not if Twitter insiders would continue to sell, but how low the stock could go. Some investors saw a floor of $29/$30-per-share. The stock traded above $35 at 9:37a.m after falling more than 8%.
$TWTR getting dumped, still have 29/30 as eventual target. insiders said would not sell, but someone is...? Marc Eckelberry (@AheadoftheNews) May. 6 at 09:24 AM
Other investors said that Twitter didn't have clear support levels below $39-per-share that would stop a free-fall.
Still others thought the stock could sink below WhatsApp's purchase price of $19 billion, considering the messaging service has more users than Twitter and is growing at a faster rate.
$TWTR - We're not selling the stock at a low!?! See you in the 20's? David Shack (@buckabucka) May. 6 at 08:52 AM
The Twitter StockTwits stream wasn't completely bearish. Some investors compared Twitter to Facebook, which experienced growing pains after becoming a public company, then reinvigorated growth and the stock price.
Also some users suggested that Twitter's high short interest could provoke a squeeze if news came out to change momentum. Twitter had 14% short interest, as a percent of float, according to shortsqueeze.com. But a majority of investors predict more pain ahead for longs before any possibility of gains.
$TWTR classic scheme at work. Use hope and emotion against retail investor. Do it slowly. No surprise to see 20's before 40's.? Morpheus (@Morpheus) May. 6 at 08:51 AM
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.