The 12 worst investments of 2014, #9: Twitter

Performance in 2014: Since the start of the year its share price has fallen by 42% to $36.73

See all 12 of 2014’s worst investments here

What have we learned?

The FT’s Hannah Kuchler thinks that investors are getting cold feet over fears that Twitter’s “slowing user growth will limit how much marketers are prepared to spend to reach its audience”. At the same time, S&P issued a report giving Twitter’s bonds a junk rating on concerns about cash flow. The Economist argues that investors might have been unrealistic in thinking that it was “set to compete head-on with Facebook, and eventually Google”.

Who are the losers?

Twitter has already fired some of its key executives. In June, COO Ali Rowghani was let go with chief financial officer Mike Gupta following a month later. Yoree Koh and Kirsten Grind of the WSJ think that these “personnel shuffles”, suggest that “Twitter may have gone public too soon”. Indeed, they think that investor pressure on CEO Dick Costolo “is growing”.

Who are the winners?

There aren’t any direct winners (apart from short sellers). However, the Economist points out that “WhatsApp (now owned by Facebook) and Snapchat, which appeal to young consumers” are just some of the competition that “could take attention and eventually advertising spending away”.

What happens next?

In an attempt to reassure markets, Dick Costolo gave a presentation in November outlining Twitter’s plans for the future. According to the FT, he predicted that “Twitter could reach $14bn in annual sales in the next ten years, ten times the $1.4bn it is forecast to record this year”. However, Business Insider’s Jay Yarrow thinks Costolo’s decision to renege on a promise not to sell any of his shares “says that he doesn’t think the stock is going to be more valuable in the long run”.

What have we learned?

Even internet superstars aren’t immune from competition.

See all 12 of 2014’s worst investments here