Twitter becomes victim of social media as earnings snafu monsters share price

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.

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.

Twitter shares ended down 9.4 percent at $US42.27 a share.