Following its blockbuster IPO, Twitter soared north of $70 per share, topping out at $74.73. Not bad for a company that priced at $26 per share. Since that late-2013 high, Twitter has retreated, trading today just over the $40 mark. It traded under that threshold last week.
In the face of that slide, and despite a massive share-price correction — read: selloff — following its fourth-quarter earnings, Twitter is scheduled to report its first quarter earnings before May 5, the date when a large number of its shares owned by employees will unlock. Unlocked shares are available for sale on the public markets.
That flood of freshly free equity could lead to a share price depression, as employees hungry for liquidity dump their long-held equity onto the public market. There is a wrinkle, however. If employees are largely convinced that the best days of their employer are ahead, they have a large financial incentive to hang on to those shares.
This makes the timing of Twitter’s decision to release its earnings pre-lockup interesting. It’s a power play of sorts. If Twitter were expecting a poor earnings report, it would want to release it post-lockup, thereby lessening the incentive for employees to cash out on the first day possible. The company wants to avoid its employees selling shares en masse, as that would provide a very negative signal to the investing public.
So Twitter is publicly betting that, by releasing earnings ahead of the lock-up expiration, employee interest in selling their shares will decrease. And you don’t negatively incentivize your denizens against harming your firm.
So log cabins aside, Twitter could be obliquely signaling that it had a big first quarter, or at least one good enough to prevent a mass sell-off of its shares by its workers.
Executives at Twitter indicated today that they intend to hold onto their shares in the company after the lock-up period ends
Twitter is expected to lose $0.03 per share (non-GAAP) on revenue of $240.93 million. In the fourth quarter of 2013, Twitter made $0.02 (non-GAAP) on revenue of $242.7 million, besting analyst expectations on both scores. However, investors soured on its slow user growth.
TechCrunch reached out to Twitter for comment on the timing of its earnings, but did not hear back by the time of publication.