How badly has Twitter Inc. (NYSE: TWTR) failed as a public company? It will have to answer that question as part of a lawsuit against it. And whatever the outcome of this case, the case for Twitter’s failure is monumental.
Shareholder Doris Shenwick claims Twitter executives misled investors on its growth prospects in November 2014, promising an increase in monthly active users to 550 million in the “intermediate” term and more than a billion in the “longer term.” The company failed to deliver on either estimate and concealed that it had no basis for those projections, the complaint said. As of June 30, the company had 313 million monthly active users, according to its website.
Granted, user growth has died, but the real indictment against Twitter is that it has not figured a way to make money, despite being among the most famous communications networks in the world. Twitter has tried sponsored tweets, video ads, football broadcasts, lead generation and multi-image tweets. Its advertising rate card lists 12 advertising options.
Twitter is still a growth company, but not in comparison to more successful tech companies, primarily rival Facebook Inc. (NASDAQ: FB). In the most recent quarter, its revenue was $602 million, up 20% year over previous year.
Its outlook was considered dismal
For Q3, we expect:
• Revenue to be in the range of $590 to $610 million;
• Adjusted EBITDA to be in the range of $135 to $150 million;
• Stock-based compensation expense to be in the range of $165 to $175
• GAAP share count to be in the range of 705 to 710 million shares;
• Non-GAAP share count to be in the range of 715 to 725 million shares.
For FY 2016, we expect:
• Capital expenditures to be $300 to $375 million;
Adjusted EBITDA margin to be 26-27%
Shenwick’s case is not founded on stock price growth, but that has to be a corollary for the suit to exist. The stock is down 62% in the past five years. Over the same period, the Nasdaq is higher by 14%. It is proof that, even if the suit fails, Twitter has failed miserably.