Should Twitter Give Its Cash Back to Investors?

Media

Published: April 27, 2016 6:50 am

Last Updated: January 13, 2020 10:15 am

After poor earnings, shares of Twitter Inc. (NYSE: TWTR) fell 13% to $15.40, which is barely above its all-time low, as well as down from $51 per share a year ago. Its market cap now sits at $10 billion, which seems impossibly high given its performance. The social media company has a chance to salvage investor value by returning the $3.5 billion on its balance sheet and auctioning off the company.

The special one-time dividend followed by a sale would guard against more valuation destruction based on another share drop. And that is likely to happen. The company forecast revenue in the current quarter to be as low as $590 million, much lower than expected numbers. This would be about the same as in the quarter just posted, in which Twitter lost $80 million on $594 million in revenue. That revenue was up from $436 million last year.

The other sign that Twitter is in its death throes is that the number of average monthly users rose only 3% from the same quarter last year to 310 million. Its user growth rate is over.

Twitter has cash, and that is about all that can be said about shareholder value.

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