Twitter stock takes a downward plunge after the end of the six-month lock-up period. Many employees and early investors in the company have parted with a major chunk of their shares but some shareholders including Jack Dorsey, the co-founder of the company, have refrained from selling their shares.
Twitter released its initial public offering (IPO) in November 2013 for $26 per share. The company expected to raise $1.8 billion from the IPO taking the company's total valuation to around $14 billion. However, Twitter's shares rocketed on the IPO release date and share price jumped by about 73 percent and crossed $45 per share.
Twitter imposed a share lock-up period of six months during which employees and early investors could not sell their shares. However, as the lock-up period ended on Tuesday, May 6, the stock market witnessed high selling of the company's share reducing the value of the shares by 18 percent and wiping off $4 billion of the company's market value.
As per The Wall Street Journal some shareholders including the company's top executives such as the co-founders Jack Dorsey and Evan Williams and CEO Dick Costolo say that they will not sell their shares. However, a couple of senior company employees filed plans to part away with a portion of their share holdings. Christopher Fry, Twitter's vice president of engineering, sold 19,568 shares at $39.09 per share. He still owns 949,181 shares in the company. Vijaya Gadde, the General Counsel of the company also sold 3,914 shares and now owns 861,642 shares in Twitter.
"More stock came for sale than people expected," said Ian Winer, director of equity trading at Wedbush Securities Inc. "If you own the stock and you see it going down so much like this, it's going to affect the way you think about it."
Many investors have raised concerns over the prospect of the microblogging website that was launched in July 2006. The company's performance has been disappointing as a result many investors as well as employees "want to take some money off the table." The number of new active users on Twitter has declined from 33 percent in Q4 2013 to 25 percent in Q4 2014.
On Tuesday, May 6, Twitter's stock dropped by $6.90, or 17.81 percent, and closed at $31.85.
