Twitter became a victim of its own technology
after market sensitive profit results were accidentally released earlier today.
The social media company's stock fell as much
as 26 percent at one point after its first quarter earnings results were posted
prematurely on Twitter's investor relations website.
The costly error was detected by a data
mining company Selerity which promptly circulated the documents and even posted
them on Twitter.
Source: Bloomberg |
The viral nature of the inadvertent posting
sent investors into a spin after Twitter's first quarter profit came in well
short of estimates and its second quarter earnings guidance was downgraded.
The incident is now the latest case study in the perils of social media and its ability to spook investors and to move markets.
The incident is now the latest case study in the perils of social media and its ability to spook investors and to move markets.
Twitter shares dropped by six percent before
trading was suspended and another 18 percent when trading resumed.
The confusion allowed traders or algorithms
following Selerity's tweets to react in split seconds to get an edge over other
investors.
A Twitter spokeswoman confirmed the earnings
announcement had been "prematurely disclosed" and that investigations
into how that occurred are underway.
"We asked the New York Stock Exchange to
halt trading once we discovered our Q1 numbers were out and we published our
results as soon as possible thereafter," an investor teleconference was
told.
"Selarity who provided the initial
tweets with our results informed us the earnings release was available and on
our investor relations site before the close of market.
"We explicitly instructed them not to
release our results until the market closed and only upon our specific
instructions."
Twitter was scheduled to release the earnings
results after the New York Stock Exchange closed for the day (4pm US eastern)
to allow investors to assess the details and to avoid a kneejerk reaction.
The results show that while Twitter's revenue
of US$436 million was up 74 percent year on year, it was below market
forecasts.
It also reported a net loss of US$162 million
which worsens last year's loss of US$132.4 million.
But investors appeared shocked when Twitter
downgraded its revenue forecasts to be between US$2.17 billion to US$2.27
billion which is lower than the range forecast in December.
"We underperformed against our
expectations. We anticipate the factors that effected our first quarter result
which also effect our 2015 guidance," chief executive Dick Costolo told
investors.
"While I'm disappointed we didn't
continue to exceed expectations on revenue I am proud of the teams focus,
innovation and energy around the way we manage the business in light of the
shortfall."
Dick Costolo is battling criticism after
Twitter's slowing user growth which climbed 18 percent compared to 20 percent
in the previous quarter.
Mr Costolo and Twitter executives are now
moving to push new innovation tools to dispel doubts about Twitter's professed
potential as a destination for advertising and social media.
Twitter is now placing a lot of hope in its
live streaming video service Periscope which has been used in major events such
as last week’s floods in and around Sydney, the Baltimore riots and the Nepal
earthquake.
"Periscope enables people to connect to
what's happening in their world and it actually takes that connection to an
entirely new level," Mr Costolo said.
"By transforming into people's lives you
can now jump into the life of a Paris ballet director, you can see what he
sees, you can hear him speak to his dancers and you can communicate with him on
the moment as his day unfolds."
Mr Costolo will be looking for similar fancy
footsteps as he bets Periscope will bring more logged-on used and advertisers
to Twitter to turn the slowing growth around.
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