3 Developments Rocking Twitter Inc (TWTR) Stock

Twitter Inc (TWTR) is falling amid a raft of negative developments, including Rizvi Traverse Management slashing its stake in half

Alex Eppstein
Aug 12, 2016 at 11:07 AM
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Twitter Inc (NYSE:TWTR) is tumbling amid a raft of troubling reports. For starters, Rizvi Traverse Management announced it has halved its stake in the social media company. Making matters worse, rumors surfaced yesterday that TWTR is shutting down next year -- though a company spokesperson said there's "absolutely no truth to the claims." Meanwhile, former CEO Dick Costolo has pushed back against yesterday's BuzzFeed exposes on censorship and widespread harassment at TWTR.

The collective news has the social media stock down 1.7% at $19.44, and threatening to undo its recent rally. Specifically, the shares have caught fire since bottoming at $13.73 in late May, buoyed by buyout rumors. However, with that M&A chatter recently dubbed "extremely unlikely," the stock appears to be petering out around the round $20 level -- above which TWTR hasn't closed since early January.

This may come as a disappointment to recent call buyers. During the last two weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open nearly four TWTR calls for every put. The resultant call/put volume ratio of 3.95 ranks in the bullishly skewed 81st percentile of its annual range.

Then again, short interest is high on TWTR. Nearly 58 million shares, or one-tenth of the stock's float, are sold short. That means some of the recent call buyers could be short sellers seeking to protect their bearish positions against a sharp upside move.

Short sellers aren't the only ones stacked against Twitter Inc (NYSE:TWTR). The brokerage bunch is extremely skeptical of the shares, as evidenced by the fact that 85% of covering analysts rate them a "hold" or worse. Furthermore, the stock's consensus 12-month price target checks in at $16.82, a nearly 13% discount to present trading levels.

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