Twitter shares plunge after $1bn loss and fall in growth

TWITTER shares fell by more than 12 per cent after the microblogging web site reported a net loss of $1.05bn (£645m) for 2013.

The news came as a shock to investors and shares plunged in after-hours trading at the end of the day on Wednesday.

Twitter began public trading just three months ago, with a valuation of around $31bn when it floated on the New York Stock Exchange, but a slowdown in growth has caused increasing concern to investors.

Subscribe to The Week

Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

SUBSCRIBE & SAVE

Sign up for The Week's Free Newsletters

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

Sign up

On average Twitter had 241 million monthly users in the last quarter of the year, up just 3.8 per cent on the previous quarter, the BBC reported.

"If you don't have an engaged user base, you don't have a business. They have got to do better on users, that is the entire story," a representative from the research firm Forrester, told AFP.

Analysts believe that the decline in growth may indicate that the social network's popularity may be beginning to plateau and that has fueled fears that the company was overpriced when it began trading, says Katherine Rushton in the Daily Telegraph.

"The apparent slowdown in attracting new users sparked concerns among investors and analysts, many of whom had already warned that Twitter was overvalued when it floated for $14.2bn last November," she explains. "Those fears have only grown in the following months, as the company's value has more than doubled to $36.63bn at the close of trading on Tuesday."

"It's at a ridiculous premium," James Gellert, chief executive of Rapid Ratings told Bloomberg. "The momentum of the stock isn't based on the current fundamentals of the company. It's based on the promise of the future business."

Twitter is currently hoping to attract revenue through new advertising models on growing platforms such as mobile and tablet, where the San Francisco-based company still sees opportunity. But according to Bloomberg, the company isn't expected to make a real profit until 2016. "Analysts have been split on the company's potential, with price targets as low as $20 from Hudson Square Research or as high as $75 at Stifel Nicolaus," it notes.