Today on its earnings call, Twitter indicated that it has no plan to host a secondary offering of its shares to provide liquidity to its large shareholders and early investors.
In a filed 8-K, Twitter had already indicated that, as TechCrunch reported, “CEO Dick Costolo, plus co-founders and board members Jack Dorsey and Evan Williams, as well as Benchmark, have no intention of selling their shares of Twitter common stock.”
As such, there is no need for an orderly secondary offering to handle the vend. In its earnings all, the company emphasized that those folks were holding onto their shares not out of some form of altruism, but instead out of belief in the “long-term” health of the company itself.
It goes without saying that those individuals and groups not selling also will lessen the impact of the large unlock on May 5th.
One final point: Previously, when Twitter announced it would report its earnings ahead of the unlock date, it was generally taken as a bullish sign. TechCrunch wrote:
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.
So what happened? Well, it could be that Twitter thought showing stronger user growth rates on a sequential quarter-basis, and beating on both top and bottom lines would be enough to placate the street.
It wasn’t. So oddly enough our above analysis might not have been wrong prima facie, but instead lost in the weeds of perception. This is why guessing is a fool’s game.
Whatever the case, Twitter is still slipping in after-hours trading as the call proceeds. It’s set a new low: $38.16 at last glimpse. That’s far below its first-day open of around $45, and its all-time high of $74. In fact, it’s trending towards the company’s IPO price of $26.