How One Tweet Wiped $8bn Off Twitter's Value

An anonymous reader writes: Someone mistakenly published earnings information on a Nasdaq-run investor relations page for Twitter before the company officially released the news and it sent the stock into a tailspin. Initially the earnings statement went unnoticed, but soon a Tweet with the results got a lot of attention. The stock lost more than $8 billion at one point as news spread. "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," said Twitter's senior director for investor relations, Krista Bessinger. "Selerity, who provided the initial tweets with our results, informed us that earnings release was available on our Investor Relations site before the close of market. Nasdaq hosts and manages our IR website, and we explicitly instructed them not to release our results until after the market close and only upon our specific instructions, which is consistent with prior quarters. We are continuing to investigate with them exactly what occurred."

Comments

The real question here

[Anonymous Coward]

How is something as useless and stupid as Twitter be worth more than $8bn in the first place?

Re:The real question here

[qeveren]

Value is entirely based on perception.

Re: The real question here

[Anonymous Coward]

Thank you. This shows the insanity of the stock market perfectly. How can it be allowed when online gambling is not?

Re:The real question here

[MobileTatsu-NJG]

How is something as useless and stupid as Twitter be worth more than $8bn in the first place?

Maybe it's not as stupid as useless as you think. Why wouldn't real-time stats on what people on the internet are talking about be worth some major buckage?

Re:The real question here

[pushing-robot]

Twitter is RSS feeds, centralized and simplified. It works well for a lot of people.

If it's stupid and it works, it's not stupid.

Re:The real question here

[CronoCloud]

Why wouldn't real-time stats on what people on the internet are talking about be worth some major buckage?

http://msti.files.wordpress.co...

You just blew my mind. I was one of those thinking why twitter was valued so high, what kind of value is in "poop tweets" or "breakfast tweets", but it's also "I saw this ad, or a friend told me about this product" It's like instant market research.

Re:The real question here

[MobileTatsu-NJG]

The use of the hashtag is counted. Those counts are then sorted into trends and sorted again by location. I would say it's less about market research and more about what's happening in the news.

Re:The real question here

[Dutch Gun]

True, but perception can be misleading. At one point in the late eighties the paper value of the real estate of the Tokyo Imperial Palace alone was perceived to be worth more than the entire land mass of California. Tokyo real estate prices peaked at about 350 times that of choice Manhattan real estate at the time. The bubble burst when, among other reasons, people realized although such was the value on paper, no one could actually sell at that price and receive anything near the current "market value".

Re:The real question here

[bluefoxlucid]

people realized although such was the value on paper, no one could actually sell at that price and receive anything near the current "market value".

I keep telling people we need our high-interest-rate market back because it'll force home prices down. Home prices go up when interest rates go down, because people are still buying the same houses for $1200/mo; the difference is whether it's a $120k house or a $350k house that you're paying $450k for. Also, with high interest rates, putting an extra $20 on your mortgage cuts off tens of thousands of dollars from the total cost; with low interest rates, you need to take heroic efforts, like tripling your payments, to save any real money.

They tell me that people just won't be able to afford houses, and that the prices won't come back down. Houses will just go unsold, forever.

Re:The real question here

[AuMatar]

The extra $20 is a broken window fallacy. Paying off 20 dollars of debt pays off 20 dollars of debt. They'd only be saving far more in the high interest case because they'd be paying far more. Either way they're losing money by paying higher interest rates.

Same with your overall interest rates. In the end, people have $X per month to spend on housing. They can't exceed that. No matter what they pay $Y in principle per month and $Z in interest per month. All that changes is the relative ratio of Y and Z. High Z, low Y and the money goes to the banks. Low Z, high Y and the money goes to the property owners. Of the two I know which I prefer.

Re:The real question here

[__aaclcg7560]

My roomate and I lived in a rented duplex during the real estate run up prior to the Dot Com Bust in Silicon Valley, where we had a bed of dead petunias in the front yard. An elderly woman walking her dog told us that our dead petunias cost her $25,000 on the value of her house. I asked her if she was selling her house. She said she wasn't. I asked her how did she know that she lost $25,000 without an appraisal. She walked off in a huff.

Re:The real question here

[Paradise Pete]

Not if you subscribe to the entirety of his post, which included prices falling due to higher buying costs, resulting in paying the same total amount, but with more of it going to interest. That makes it a better way to make use of an extra $20. That's his idea. I'm not endorsing it, but that's what he's saying, so no broken window fallacy.

Re:The real question here

[magarity]

At the beginning of a mortgage, depending on the interest rate maybe $19.99 or $18.00 of each $20 payment may be towards interest instead of the base debt. When interest rates are lower, more of the payment is toward the debt, which builds the payer's equity. Your payment (unlikely to be the same under different rates since the higher interest rate needs a higher payment to work out over the same term) under different interest rates goes towards interest or equity at different rates and that's not a broken-window fallacy comparison. The money you pay for interest is lost to time; what you pay towards equity is an important form of savings.

Re:The real question here

[quantaman]

How is something as useless and stupid as Twitter be worth more than $8bn in the first place?

By making 100's of millions in revenue every quarter.

It's one of the biggest sites on the Internet and is used by people constantly, it's hard to imagine how it wouldn't be worth more than $8bn.

Re: The real question here

[Penguinisto]

The reason why is because there are two ways to buy/sell stock.

The original intent was to own a piece of the company via buying stock, investing in its long-term growth, and reaping the benefits by selling it at some indeterminate point in the future.

The modern method (via shorting and similar tricks) is gambling.

Problem is, in order to eliminate the gambling aspect, the SEC would have to require a minimum 1-2 year holding period between sales of a given share of stock... that is, you buy the stock, but you cannot sell it to anyone else until it has been in your possession for at least 12-24 months or so. Good luck having that happen. :/

Re:The real question here

[msauve]

That's only correct if you believe that the $120K house he mentions now costs $350K because of lower interest rates. I submit that is not the case. House prices may rise with lower interest rates and increased affordability, but not nearly that much. The example buyer is getting much more for their monthly payment with lower interest rates.

Re:The real question here

[msauve]

But $577,820,000 in 2014 losses (and they've never made a profit)? Sell at a loss, and make it up in volume?

Believe it or not, but some companies actually make a profit on their revenue.

Re: The real question here

[HornWumpus]

If you hold a stock for less then 2 years income is taxed at regular income rate, reflecting the speculative (gambling) nature of the play. If more then 2 years it's a capital gain.

Re:The real question here

[drinkypoo]

Home prices are high because banks refuse to sell them. They'd rather they rot, become inhabited by squatters, get stripped of their fixtures, and finally burned down by someone in the neighborhood who feels that a smoking crater would be more valuable to it than a crack house.

Re: The real question here

[Enigma2175]

If you hold a stock for less then 2 years income is taxed at regular income rate, reflecting the speculative (gambling) nature of the play. If more then 2 years it's a capital gain.

It's actually one year

Re:The real question here

[Ranger]

Yup.

Re:The real question here

[Anonymous Coward]

The real Question here is actually, is this a retaliatory action based on their decision to move their operations out of US jurisdiction. Ireland anyone?
Twitter announces they are going offshore, and a week later their finances get released early, causing a drop in the market.... sounds suspicious to me.

Don't call me a tin foil hatter, they go after other people/interest groups/companies for less....

Re:The real question here

[quantaman]

But $577,820,000 in 2014 losses (and they've never made a profit)? Sell at a loss, and make it up in volume?

Believe it or not, but some companies actually make a profit on their revenue.

The thing with a massive amount of revenue is a proportionally small amount growth in revenues or drop in costs can make them extremely profitable.

Twitter is still a very young and growing company, the future has a a lot of potential profit.

Re:The real question here

[MobileTatsu-NJG]

I know you were going for a cheap laugh but unfortunately you've struck really close to home about how bad economics is understood around here. Some of the upmodded comments around here about supply and demand and markershare are just plain headache inducing.

Re:The real question here

[Dutch Gun]

She should have been happy. There's typically no reason to want your property to increase in value unless you plan to sell it. It just increases your property taxes.

Of course, what she was actually trying to tell you, in her lovely passive-aggressive way, was to fix your damn flowerbeds, but you went and had to bring logic into the argument!

Re:The real question here

[UnknownSoldier]

Indeed.

Nothing of value was "lost."

Re:The real question here

[NormalVisual]

"In that case, if you write me a check for $12,500 I'll start ripping this bed out right now and we'll both come out ahead!"

Re: The real question here

[NormalVisual]

and reaping the benefits by selling it at some indeterminate point in the future.

Or when the company declares a dividend, but that's a bit of a quaint idea nowadays.

Re:The real question here

[mattack2]

She should have been happy. There's typically no reason to want your property to increase in value unless you plan to sell it. It just increases your property taxes.

The post you're replying to was in Silicon Valley, obviously in CA. So the property tax is (mostly) based on the purchase price + some small growth allowed each year. That was due to Prop 13. So just because the value goes up, doesn't make the property tax go up... unless something happens to cause it to get reassessed (I think major improvements to the house can do this). But simply living in it doesn't.

(Some transfers, e.g. between some family members, don't cause reassessed value too..)

Re:The real question here

[AvitarX]

I don't know, when I was house shopping int he early 2000's, it was pretty clear that lower rates caused massive price increases (95-2000 era), rents remain stable (or more tied to income), as lone as incomes remain steady, houses are somewhat protected from price drops (which is why it took other economic drag to trigger the '08 crash) by virtue of peoples' payments still matching rents, and the cost to leave gets high.

Housing prices loosely match the amount of house you can buy with rent * .8 on a 10% down mortgage (if they go below that investors rent them, if they go higher, landlords sell them and increase supply).

Re: The real question here

[AvitarX]

Modern? the stock market is far less gambling than it was in the 1600's.

Re:The real question here

[Austerity Empowers]

Value is entirely based on perception.

Wall Street is entirely based on perception. I can point to very few stocks that one should buy based on them being a good deal for actual value of the company. Just buy/sell and hope you're not the top of the pyramid.

Re:The real question here

[__aaclcg7560]

I think it was the wealth effect, where people perceived themselves as being richer than they really are. Californians love to brag about their real estate prices, especially when it goes up as it did before the Dot Com Bust (2001) and the Great Recession (2009).

Re:The real question here

[Dutch Gun]

Interesting... I wasn't aware of how that worked in California. That seems a little bit more fair for people who purchased property before value happened to skyrocket. My property tax is based on the assessed market value of my home, so I'm happiest when the local housing market is depressed.

Re:The real question here

[mattack2]

It's good for a long term homeowner, but messed up lots of other things.. As a kid, I remember tons of after school activities and such that _older_ kids had suddenly went away after Prop 13 went in. (Probably more than after school activities, but that's what I remembered at the time...)

(I bought a few years ago, so I have a high purchase price, but will "benefit" from Prop 13 if values go up higher and I thus don't have to pay hugely increased property tax.. But I do think things should be more even across the board.. NOT wealth distribution, but I would do away with subsidies, even ones I benefit from, like mortgage tax deduction -- that would simply get me to pay off my mortgage rather than make more investing the money, like I can do now.)

Re:The real question here

[Falos]

Taking a picture of your screen with a phone is stupid. Full stop.

wait no not yet I didn't snark about equally stupid vertical shots aw damn it

Re:The real question here

[AuMatar]

More or less right. There's a few other considerations though.

1)Taxes. You aren't taxed on "returns" from lowering debt. You are on investments. You need to factor that in.

2)Risk. The risk of investments are different. The risk of stock is on the company (and sector, and economy's) performance. The risk of bonds is the company or government going bankrupt. The risk of paying off debt is you personally being unable to make debt payments in the future and losing your collateral.

3)Ability to cash out. If you pay off a car loan early, you can't cash that out (as the loan is likely more than the car is worth on the secondary market). If you pay off a mortgage, you have to sell the house to get the money back. With a stock, you can cash out at any time although possibly at a loss.

Re:The real question here

[LostMonk]

How could a glorified cab dispatch could be valued at $40+ billions?
Am I totally clueless or is it just a bunch of VCs barking at the mountain-side and thinking the world is cheering them on?!

Re:The real question here

[radl33t]

Sorry what? Generously, they make 1.6b in revenue, allowing them a net margin equal to google and they need to increase revenue by 15X and somehow salvage 25% of that into net income. AKA they need 6x their current revenue as income. On just revenue At 2014 pace this looks like 15 years away, lol. Nice investment horizon. If things don't slow down, a number of absurd assumptions hold over this time, the value you pay for the company might be worth it in 2030. What a hilarious investment. Any proposals on how this will happen? They are going to get 15x paying customers or 15x revenue out of each customer? Presumably their are proportionately increasing operating expenses of this monitization, how do they generate profit? Keep in mind if they are less profitable than "insanely" they need even more revenue growth. Its patently absurd.

Re:The real question here

[smallfries]

This depends on the type of mortgage that you buy. Deals where the lender front loads the interest payments are typically fixed-rate, fixed-term, products. At the other end of the spectrum are interest-only deals with overpayments. In those your bill is however much you owe on the outstanding loan at this this months interest rate, with any payment over that level paying off the debt. Inbetween there are many types of hybrid product.

Re:The real question here

[quantaman]

Sorry what? Generously, they make 1.6b in revenue, allowing them a net margin equal to google and they need to increase revenue by 15X and somehow salvage 25% of that into net income.

Huh? Why are you comparing their margin to Google's? There are sub-Google levels of profitability.

Re:The real question here

[bluefoxlucid]

In one scenario, you're paying $980 of interest and $20 of principle on your first like 50 payments (not exactly accurate: you're accruing $980 of interest, then paying $1000, moving your balance down by a net of $20). Paying $20 extra bypasses $980 of accrued interest in the end, saving you money.

In another scenario (low interest rate), you're still paying $1000/mo for 360 months; but even the earlier payments are like $850 of principle and $150 of interest. Whereas each $20 will save you $980 off the total cost of the house, you have to put down $5553 extra on each of those early payments to save $980.

With a lower interest rate, the sale price is higher: since much of the cost of the loan is not interest, you can't dismiss it by prepayment. Whereas $120k of sale price and $330k of interest can be reduced to $220k in total (saving $230k) by adding an extra $300/mo, low-interest rate markets turn this into $330k of sale price and $120k of interest, while requiring heroic efforts (extra $5000/mo) to shave off half your interest, in the end reducing only to $390k (savings: $60k).

You're better able to reduce the total cost to yourself with minimal additional capital investment when interest rates are high and loan terms are long. The natural inflation (increase in salary) or your ability to manage your finances will provide you with additional money over time, allowing you to increase your loan payment; with high interest rates, small increases in prepayment become huge savings off the total loan cost.

Re:The real question here

[bluefoxlucid]

tl;dr: guy 1: "Falling interest rates would never cause home prices to rise!" guy 2: "That's exactly what just fucking happened 10 years ago!"

Re:The real question here

[bluefoxlucid]

Every extra dollar you pay to reduce the principle on a loan is equivalent to taking that dollar and investing it with a rate of return equal to the interest rate on the loan.

False.

Every dollar you pay to reduce the balance of a loan is equivalent to investing with an instant return of the principle-to-interest ratio of the total payments that would naturally decrease that loan.

Let's say your next five $1000 payments each drop your loan balance by $20, $20.01, $20.03, $20.04, and $20.05. In common terms, these are your principle payments, and the rest is interest. Over the next five months, you will pay $5000; $100.13 will go to principle, and $4998.87 will go to interest.

If you pay $1080.13 this month, you'll skip the next 4 months. $100.13 will go to principle, and $980 will go to interest; for that $80.13 invested in your debt, you will have saved yourself $4018.87 in interest--a return of 5,000%!

You might argue that the loan is 30 years long, so it's only like 10% for 30 years--but that's only $1600, and the actual amount saved is 250% of that. Likewise, you've just reduced what you owe; keep it up and you'll have a 30 year mortgage paid off in 3 years (I did, and at 2.5% interest, making 4x or 5x payments each month). As well, you're paying interest on accrued interest: each month, you accrue a brand new $980-ish interest, which you are continuously compounding interest on until you make your payment; you're paying interest on the average $490, approximately, which is still bigger than that $80 you invested.

Any way you look at it, putting a small prepayment on a loan with a big balance reduces your debt--thus provides you income--a shitload bigger than that amount of money accruing interest over the life of the loan.

Re:The real question here

[tehcyder]

How is something as useless and stupid as Twitter be worth more than $8bn in the first place?

Ever hear of the Arab Spring? Aka the twitter revolution?

Even if that's true, it is no indication that Twitter can make a profit and therefore be worth anything in terms of stock market valuation.

I'm fine with non profit organisations, I'd just rather they didn't pretend to be businesses.

Re:The real question here

[tehcyder]

How could a glorified cab dispatch could be valued at $40+ billions? Am I totally clueless or is it just a bunch of VCs barking at the mountain-side and thinking the world is cheering them on?!

It's a self-fulfilling prophecy. The more money the VCs chuck at young, exciting, disruptive etc companies, the more people think there must be something behind it all. It's a wonderful combination of Ponzi scheme and the Emperor's New Clothes.

Re:The real question here

[AuMatar]

No, its still only the interest rate percentage return. That's what compounding does. Of course compounding works on other investments too- you reinvest your profits, either there or elsewhere. So its not a magical advantage of paying off debt.

Re:The real question here

[bluefoxlucid]

No, its still only the interest rate percentage return.

If I use the Pe^(RT) formula on $100 at 10% for 15 years, I get a much smaller value than the amount of total cost saved if I pay an extra $100 on a 10% mortgage with a $300,000 balance.

You're missing something: $100 in the bank gets 15 years of 10% interest compounding continuously on $100 (yes, banks pay simple interest; that's not the point). That means it's 1/365 of $100, then 1/365 of $100+$100/365, and so forth. Loans don't work that way.

With a loan, you accrue interest, and then pay down balance. If your early payments are $1053, and you accrue $1000 interest, you're only paying $50 in. Instead of getting 10% interest on $1053, you're paying $1053 to avoid paying 10% interest on $53. Month over month, that $1000 comes rolling in; but if you pay an extra $53, you skip a month--suddenly $53 is worth $1000.

For $53 to turn into $1000 over 30 years, the interest rate must 23.13%. For a $120,000 loan at 10% interest, your first payment will be $1053.09, with $1000 paying accrued interest, and $53.09 paying down balance; the first payment in the second year pays $994 interest and $58.64 balance. If you drop about $50-$60 into any of those first payments, you save $995-$1000.

$60 at 10% compounded continuously over 30 years is $489.29. $60 dropped into your very first loan payment at 10% saves you $1000. $1000 is bigger than $489.29; paying off long-term debt is bigger than holding continuously-compounding savings at the same interest rate for the same period.

Re:The real question here

[AuMatar]

Your math is just wrong all over. You're using the wrong formulas and confusing yourself.

If your monthly payment is 1000 and you pay an extra 50, you take 50 off the principle. That means next year you pay 50*rate less in interest for all years in the future. Assuming you don't change the payments (and assuming fixed rate loans), this means for the same amount of monthly money you pay off 50*rate more each year. That's a savings of rate compounded annually. That's all the return you get.

Re:The real question here

[bluefoxlucid]

If your monthly payment is 1000 and you pay an extra 50, you take 50 off the principle.

Each payment, you pay for accrued interest. You accrue like $980 of interest on that first payment, $979.93 on that second, etc.

If you pay $50 more on that first payment, you skip the immediate next payment. You have 1 fewer payment to make, and it's not that last payment where you pay $999 principle and $1 interest; you skip that second payment where you pay $20 principle and $980 interest.

The math is right. Use a mortgage amortizer, use the Pe^RT formula for compound interest, and look logically at how mortgages work--how the payment schedule works. It works the way it does because we've written laws about precomputed interest to make sure it works the way I say--it's illegal to precompute all of the interest up-front and make the person pay it all even if the pre-pay; interest must be compounded by the passage of time, instead of the prediction of time's passage.

Something tells me you're not a financial expert.

Re:The real question here

[radl33t]

That was my attempt at a favorable comparison. Lower profitability requires even more revenue to justify their valuation. That is more difficult than the challenge I propose.

Re:The real question here

[quantaman]

Google also has more than 10 times the market cap (15 currently but probably closer to 10 when the report came out).

Halt Trading?

[Anonymous Coward]

This seems to be a common thing for NASDAQ to halt trading. Can NASDAQ halt trading any time my stocks start doing poorly?

Re:Halt Trading?

[Meshach]

This seems to be a common thing for NASDAQ to halt trading. Can NASDAQ halt trading any time my stocks start doing poorly?

Probably only when that stock is worth billions of dollars and its decline could send the whole market into a tailspin.

Re:Halt Trading?

[FooAtWFU]

NASDAQ will halt trading any time your stock suddenly starts doing badly enough (in terms of percentage drop during an individual trading session) but it won't do you much good if people have fundamentally lost faith in your business. All it does in that case is postpone the inevitable by a couple hours at best.

Re:Halt Trading?

[Rich0]

This seems to be a common thing for NASDAQ to halt trading. Can NASDAQ halt trading any time my stocks start doing poorly?

The purpose of it is reasonable enough. If news is being released, they halt trading so that you don't have to worry about people on one news site getting the news 10 seconds ahead of people on another news site, or traders trying to guess the entirety of the news as it is revealed a word at a time.

Basically you plan to release earnings at a particular time, everybody knows this, trading is halted, the entirety of the report is released, people are given a short time to skim the relevant parts, and then people can resume trading having some semblance of having digested the news. That keeps the market more efficient rather than having big swings as people guess at what others might or might not have figured out that they haven't noticed in the news yet.

The same is true of sudden stock movements. It could be a computer glitch. Or it could be insider info. Halting trading lets everybody catch up with the true state of the market, and then everybody gets to start off on a reasonably equal footing. If the issue was a computer glitch humans have a chance to step in and ensure they are trading based on their sense of the actual value of the company.

As was pointed out already, if the fundamentals are bad, nothing is going to help you.

Re:Halt Trading?

[Paradise Pete]

Can NASDAQ halt trading any time my stocks start doing poorly?

They do it simply to maintain an orderly market. It's not magic. When trading resumes it doesn't fix your poorly performing stock.

Re:Halt Trading?

[Pinky's Brain]

If the market is more efficient when trade is slowed down so most participants can interpret the available information then what is the value of HFT?

Re:Halt Trading?

[Rich0]

If the market is more efficient when trade is slowed down so most participants can interpret the available information then what is the value of HFT?

It is supposed to serve a different purpose, but IMHO it serves little purpose that benefits the general public, which, again IMHO, is the purpose of having a stock market.

It wasn't the tweet

[Snowgen]

It wasn't the tweet that caused the sell off, it was the poor Q1 numbers.

Re:It wasn't the tweet

[Fwipp]

The idea that releasing the Q1 earnings after-hours allows people to make better judgments - they don't think "shit I have to sell all my stock RIGHT NOW", because they have a bit to think about it before the morning. Otherwise, you get a runaway effect, with some people selling early, people noticing the stock price dropping, and it starts crashing as more and more people try to sell before it "craters."

In theory, more time to react will smooth out your responses and make things less scary.

Re:It wasn't the tweet

[netsavior]

It wasn't the tweet that caused the sell off, it was the poor Q1 numbers.

Well sort-of. The thing is wall street speculation is now highly automated. If a stock starts to slip before the numbers are supposed to be released, all the algorithms start to throw off warning bells and cause a sell-off run much more efficiently than humans reading twitter ever could.

If stock slips during an earnings announcement, it is expected, and bots don't emulate panic... if it happens BEFORE earnings announcements, bots latch on to the pattern in what is essentially insider trading, but with plausible deniability.

Re:It wasn't the tweet

[antiperimetaparalogo]

It wasn't the tweet that caused the sell off, it was the poor Q1 numbers.

But maybe the poor Q1 numbers was because of twitter... hmmm?

Re:It wasn't the tweet

[Frobnicator]

The thing is wall street speculation is now highly automated. ... and cause a sell-off run much more efficiently than humans reading twitter ever could.

This is exactly what triggered it. The page was up for forty five seconds. 45 seconds is not enough for humans to read and understand it, but that is plenty of time for bots.

During that 45 seconds, assorted stock-trading bots picked up on it, scanned it, and sold over 3M units, or $153M, of their stock. That's over 30x their normal trading levels.

The huge uptick in stock sales triggered another bunch of automated trades, and over the next 18 minutes they had more trades than they had seen all quarter -- the last trade spike that big was after their last earnings report, when the price jumped from about $37/share to around $50/share.

Then, about 18 minutes after the brief posting, trading stopped because of the anomaly. It is normally an effective tactic when trading bots go crazy.

20 minutes later trading was resumed for the remaining half hour of the day. There were over two million trades per minute over that half hour, and the stock price continued dropping from $51.24 to $42.27, with a slow but steady drop today down to $38.49. Days like this make me laugh at stupid investors. No point in selling now, the value is already lost. It is unlikely another bombshell will be dropped. Selling just reinforces your losses.

Of course, if you're a long term investor you'll note that nothing about the company changed; no deals were cancelled and they are still growing in ways that matter. Their stock is low, making it a good value to pick up.

Re:It wasn't the tweet

[swb]

The idea that releasing the Q1 earnings after-hours allows people to make better judgments -

What you mean is that releasing the earnings after hours allows all the big guys to dump shares first, minimizing their losses, and everyone else wondering if they should eat the now-massive losses on what they hold or just keep holding and hope it goes up again.

Re:It wasn't the tweet

[AuMatar]

Its a good value to pick up if you have some long term faith in the company. But any company where the CEO is making 70 million to lose money sounds way too much like the management is running it for their own benefit to me. I won't be buying.

Re:It wasn't the tweet

[ceoyoyo]

Just announce bad news first thing on Monday morning when everyone is in a bad mood and buy any of your stock that's offered below whatever limit you think is reasonable. Profit.

Re:It wasn't the tweet

[quantaman]

The thing is wall street speculation is now highly automated. ... and cause a sell-off run much more efficiently than humans reading twitter ever could.

This is exactly what triggered it. The page was up for forty five seconds. 45 seconds is not enough for humans to read and understand it, but that is plenty of time for bots.

During that 45 seconds, assorted stock-trading bots picked up on it, scanned it, and sold over 3M units, or $153M, of their stock. That's over 30x their normal trading levels.

This doesn't quite make sense to me. Assuming the bots are smart enough to parse the earnings reports (highly plausible) wouldn't they react the same as if it were a proper release?

Why is the early release difference? Would this same drop have happened when the bots saw the news overnight and reacted the next morning, or would the human investors have done something that would have changed the bots behaviour?

Re:It wasn't the tweet

[Penguinisto]

And the fact that the poor Q1 numbers were again accompanied by outrageous executive compensation didn't help either. It must be really nice to be in mr. Noto's shoes, getting about $72.8 million dollars for half a year's work - well, presumably less now due to the stock grants part taking a plunge.

There is one sure, fair, and solid way to put a stop to "outrageous executive compensation"... stop buying stock in companies that grant such pay/bonus levels.

While it seems like a stupid move to lavish cash on a CxO who is running a company that is bleeding cash left right, and sideways, it's the perfect right of stock investors to make their own judgements as to how stupid/not-stupid they believe such a thing to be.

Re: It wasn't the tweet

[antiperimetaparalogo]

Notice how this happened after Twitter start giving in to SJWs in the name of "dealing with harassment?"

Legitimate users are being forced off Twitter leaving them with nothing but a horde of toxic SJWs. It's no wonder they're tanking: whatever value was there has been destroyed.

I never used twitter, but since i am one of those people that the "SJWs" would gladly hung from a tree because of my political views, and since as a Greek/European the "anti-racist/discrimination/harassment" laws already provide to them the rope...

Re:It wasn't the tweet

[Frobnicator]

This doesn't quite make sense to me. Assuming the bots are smart enough to parse the earnings reports (highly plausible) wouldn't they react the same as if it were a proper release?

There tend to be many additional news stories that temper the results. The markets close at 4:00 PM. That is exactly the moment when the reports leave embargo. Within an hour or so there are human-considered reports hitting the news, and by the time the markets open at 9:30 AM the next day there is plenty of context to place around it.

In this case the bots only get a single source of information and instantly react. Then they are in a hyper-sensitive feedback loop and notice what other bots are doing, selling millions of stock based on a single data point.

When the markets are closed overnight the bots see news articles with both positive and negative reactions, with good words and bad words, building up many different data points, and they tend to take more balanced reactions.

Re:It wasn't the tweet

[kamapuaa]

What the fuck? You know nothing about stocks, why are you talking about it?

The company effectively did change. Investors were expecting $470-485 million sales, and it actually came out to $435 million, and revenue went down 9%. Really shitty news. Naturally, it drove the price down. If news on twitter had been great, the stock would have jumped.

This is a non-story. The stock would have done the exact same thing if they had released the information at the proper time. It just would have done it a day later.

If you think I'm wrong, then BUY EVERYTHING YOU FUCKING CAN IN THIS STOCK. If it sank due to a non-issue, then it should snap up 20% tomorrow.

Re:It wasn't the tweet

[penguinoid]

This doesn't quite make sense to me. Assuming the bots are smart enough to parse the earnings reports (highly plausible) wouldn't they react the same as if it were a proper release?

You see, you have to sell it now before the price drops. If you predict that the price will drop further due to panic selling, time to sell again. Then you buy it back after you predict that the panic has ended. If the sudden buying causes the price to soar, well then that just means you have to sell it again before other people notice...

Presumably if the release had been proper, the machines would have been instructed by humans as to what specifically to do with the stock when the markets opened, and also wouldn't predict any panics.

Re:It wasn't the tweet

[DrJimbo]

Given the way traders think that is the damage that they caused. A few more cases like that and perhaps they will consider that they need to spend a couple of billion on making the bots not panic.

Wall Street will never police itself. It is entirely geared around making as much money as possible with absolutely no concern whatsoever about what is good for society or for the economy in general.

The only real solution is very simple and very easy. Simply tax the transactions. It can be a tiny fraction of a cent per transaction. This will add friction which will slow down this hypersonic trading. The whole thing is ridiculous. These superfast computerized trades are not providing a benefit to society. In fact, they lead to instability which is the exact opposite of what is good for society as a whole.

If we don't do this than the instability will lead to Wall Street crashing our economy again. It is like the RIAA wanting to be paid to make it difficult for people to listen to music. Wall Street is making money hand over fist by making our entire economic system unstable.

Re:It wasn't the tweet

[citylivin]

"45 seconds is not enough for humans to read and understand it, but that is plenty of time for bots. "

I now picture a bunch of counterstrike bots running around TK'ing eachother, running into walls and forcing legitimate players to disconnect. I think that is the entire global financial system in a nutshell.

Twisted perception

[Taco Cowboy]

Value is entirely based on perception

... which is often biased and/or twisted

Re:Twisted perception

[zlives]

free market or faith based market system?

Re:Twisted perception

[Archangel Michael]

The current version of free market is faith based. You have faith in fiat currency, just to start with.

Re:Twisted perception

[MrBigInThePants]

All currencies are Fiat.

Just because you back one thing of perceived value with another thing of perceived value does not make it less than arbitrary.
Although I will agree backing it with gold makes it "less arbitrary" it is still arbitrary. Not that this is possible anyway since moving a large economy to this would cause a disaster scenario in the price of gold and there is not enough gold for this anyway.

Re:Twisted perception

[AvitarX]

If the implication is that we should have metal backed currencies, I think this addresses the issue there:
http://michaelatate.com/AdamSm...

Purchasing power of gold wildly fluctuates over time.

Re:Twisted perception

[schnell]

Nothing says you can't have inflation in a commodity currency (gold from the new world famously did so after all) or deflation. Nothing says the "value" is constant or not arbitrary or anything different from the perceived value.

That's not how it's supposed to work under the old "gold standard" that tinfoil hatters worldwide espouse a return to. Under the old method, you would peg your currency at "$4.75 = 1 ounce of gold" and that was expected to never change. Ever. Otherwise, what's the point if I can say a dollar is worth .00075 oz of gold today and .0008 oz. of gold tomorrow? Because that's pretty much how it works in the open exchange market today. Currency values fluctuate, the price of gold fluctuates - who cares if you can't force the government to give you gold for that dollar bill when you can always find someone to sell some gold to you in exchange for those dollars at the market price?

And the thing that caused everyone to get off the darn gold standard in the first place was not only that you could have inflation or deflation, but if you had deflation or inflation, there was nothing your country could do about it. And if you are deflating and you can't do anything to stop it, your economy is f$%&*ed.

Aside: For those wondering why economists are so scared of deflation, it's because it destroys the rationale for people to save and invest. If it costs $1 to buy a Big Mac today and will cost $1.10 next year, instead of just sitting on my leftover lunch money I should put it in a bank or invest it so that it makes money and I have enough cash for next year's Big Mac. If next year's Big Mac only costs $0.90, then why risk investing it? I will just keep it under my mattress and I have "made" money (more purchasing power) by doing so. Money in mattresses = banks have no money to lend to people who want to buy houses or start businesses = fewer jobs = vicious cycle of economic misery. This, by the way, was what clobbered the world economy during the Great Depression (along with all the banks that collapsed and ate everyone's savings account, making everyone very nervous about putting their money in the bank).

And there's no such thing as "not enough gold". If you moved the world to a gold standard overnight and we pretend that the world economy doesn't collapse then there's enough gold - the value of gold relative to everything else sky rockets of course. And you use a use a representative currency not actual gold coins of course.

Even that doesn't really work though. In Rand Paul's Good Old Days of the Gold Standard, when the world economy was probably 1/50th(?) of today's size but the supply of gold wasn't all that much smaller, you could walk into a Federal Reserve Bank with a non-ridiculous amount of bank notes and walk out with enough US-minted gold coins that you could trade it or do something meaningful with it. If we tied the world economy back to the gold standard at its current size, it might cost you $10,000 to get a big enough slice of gold that it wouldn't just disappear if you sneezed. And if gold is only useful in gigantic transactions far above the amount of cash most people can afford, what's the point?

Re: Twisted perception

[Falos]

It wasn't even the right circular logic. The idea that gold will be a safe store of value is based on the idea that yesterday gold was a safe store of value, not transistors.

Re: Twisted perception

[DrVxD]

It's mostly based on the fact that gold is pretty...

Re:Twisted perception

[schnell]

Fair enough point. But the rationale for the gold standard I have heard from most proponents was that paper money "isn't real" and only has value as a more convenient way of, in effect, carrying gold around since it has "real value." (I also find more than a little irony in having met a few of these folks who are also major proponents of BitCoin and manage to swallow the cognitive dissonance nicely.)

If your rationale for supporting a return to the gold standard is keeping governments honest about their spending, then I find that much more rational. It just seems from historical example to be incompatible with promoting real economic growth, or dealing with expediencies (for example, financing World War I was the reason most countries got off the gold standard in the first place).

Re:Twisted perception

[Archangel Michael]

Basically that governments can't increase the money supply arbitrarily.

Our (US) government can't increase or decrease the money supply. The Federal Reserve, a privately held company does that. You want to know why we're screwed? Because only a handful of people have control of the entire US economy, and a large part of the world economy.

Re:Twisted perception

[Archangel Michael]

Purchasing power of gold wildly fluctuates over time.

You say that like it is a bad thing. It isn't necessarily a bad thing, just different.

I'd say having unaccountable private enterprise (the Fed) in charge of money supply has, at least partially, been responsible for dismantling the middle class, and the accumulation of wealth by the few at the top.

Re:Twisted perception

[nedlohs]

That's simply false. Treasury can mint coins without any interaction with the Federal Reserve and thus increase the money supply.

Re:Twisted perception

[zlives]

the middle class didn't do so well in gold based economy either, if anything the meddlesome Fed was partially responsible for the taxation and redistribution during the golden years of middle class. the rules have changed in favor of the elite but who knows maybe one day they will swing back. the type of currency has nothing to do with it.

Re:Twisted perception

[Actually, I do RTFA]

If next year's Big Mac only costs $0.90, then why risk investing it?

To get more moeny, duh. I mean, you're right that the mattress now offers an effective 10% or whatever, but that just means banks offering 3% are really offering 13. 13 is greater than 10.

Re:Twisted perception

[MrBigInThePants]

!WRONG!

FIAT
noun
a formal authorization or proposition; a decree.
"the reforms left most prices fixed by government fiat"
an ARBITRARY order.

It is in fact the very definition of the word and the reason it applies to currencies.

Please try again and remember to do your homework this time...

Re:Twisted perception

[MrBigInThePants]

>Aside: For those wondering why economists are so scared of deflation, it's because it destroys the rationale for people to save and invest.

Dude, you have that backwards!?

Deflation means your money goes UP over time. It means people are more likely to BURY their money than take risks on the stock market.

But the real reason that deflation is so scary is in fact the debt addiction that everyone has.

Effectively the entire economy is negatively geared. It is in a "grow or die" scenario. If you grow, you take away interest and have less growth. But if you shrink, you shrink by a LOT more than the growth loss and risk a death spiral. (e.g. capital flight etc)

Apart from that, you were making sense...

Sorry about that

[PPH]

Thought I was posting nude pix of the ex g.f. but I clicked on the wrong file.

More to this?

[Anonymous Coward]

Another story covering the tweet suggests a slightly different story:

What Selerity does â" and they've done this before with Microsoft and ADP â" is monitor the web pages of public companies for changes that might be public, but not necessarily indexed.

This can be done using a simple web scraper â" an application that simply scans a site for pages, often systemically trying every likely URL for a live website.

(cut)

In the case of Twitter's earnings report, it appears that the third-party company (which according to Twitter is the Nasdaq-owned Shareholder.com) that handles Twitter's investor relations page published the page with its quarterly results, using a web address that you could intuit from its current URL scheme.

The URL scheme Twitter used was "https://investor.twitterinc.com/releasedetail.cfm?ReleaseID=XXXXXX." The last published news release had the ID number of "905554."

Presumably, Selerity just had to continue to try iterations of that number sequence until it found the report. Twitter's Q1 2015 earnings had an ID number of "909177" â" meaning the Selerity web scraper would have had to try less than 4,000 numbers before hitting on the right one. Given today's processing power, that could happen in the blink of an eye.

This apparently was denied by Selerity but as many have pointed out, if it were true, is it that different from what troll weev was convicted and did jail time for?

Is guessing a URL really a "hack"?

Re:More to this?

[jesseck]

That was among the first things that popped into my head (after "Twitter is worth that much?"). A company used a discernible pattern to "hide" information on hopes it would not be found. That doesn't work, especially when the company is high-profile. People that want the data will look for it... there is no stopping them. Maybe Twitter will learn to protect confidential data prior to scheduled release.

Re:More to this?

[initialE]

Why post your financial statements in machine-readable text? Use an image or CAPTCHA anyone?

Re:More to this?

[tehcyder]

Is guessing a URL really a "hack"?

Quite. If you don't want someone to read your stuff, don't put it on the internet and hope no one notices.

I hate twitter

[Karmashock]

Or I hate how people use it. It is a good service to share little nuggets of information amongst a lot of people. But it is often used to express political views or talk about current events and you can't make a rational contribution on complex issues with that character limit.

Both twitter and facebook can go to hell.

Re:I hate twitter

[Rich0]

All the news that's fit to print in 140 characters. Like this post.

Not properly dishonest

[Quixadhal]

You know, the fact that companies are expected to release their earnings numbers AFTER the market closes just smacks of how stupid the entire market system has become these days. In years gone by, such behavior would have been considered shady, as it's basically concealing the numbers until people can't take action upon them.

Sure, you can argue how it protects the market from knee-jerk reactions and panic... but do you want a free enterprise system or not? Freedom includes the ability to do stupid and impulsive things. Investing in the market should be risky, as it should only be done with "extra" money anyways. Too many people want the market to be a higher-return savings account to put their retirement and life's savings into.

Re:Not properly dishonest

[andymadigan]

They can take action on it the next day, once everyone has had a chance to receive and digest the information, rather than acting in a split-second on instinct and fear (and still being beaten to the punch by a computer).

Re:Not properly dishonest

[Krishnoid]

After-hours trading means they can take action on it that day (and typically do), nowadays.

Re:Not properly dishonest

[radarskiy]

One of the conditions for a "free market" is symmetric information. By releasing earnings numbers after the market closes, everyone will have the same information by the time it opens again in the morning.

While an appeal to personal responsibility sounds catchy, you have failed to account for the effect on other people who have acted in a reasonably rational fashion. The benefits of the market accrue to the market as a whole, not to any particular player.

Re:Not properly dishonest

[thegarbz]

as it's basically concealing the numbers until people can't take action upon them.

You have made one fatal assumption, that people are taking action. They are not. The market is no longer built around people but "Panic Investor Bot v2.54" who's biggest feature is that it can respond 1ns faster to a price fluctuation than v2.53.

If Twitter didn't exist, would it exist anyway?

[swb]

What I mean is, does a public news-ticker kind of short message service fill such an obvious need/value that even if Twitter(tm) didn't exist it would ultimately exist anyway?

Re:If Twitter didn't exist, would it exist anyway?

[Karmashock]

No, we don't need it twitter for any of that. We already have news sites that are better at handling all of this... event the tabloidy ones are better. I can't tell you how many people I've seen turn their noses up at some site or other because it doesn't have a good reputation and then read twitter as if any random jackass is credible or not just another fucking troll.

Re:Its really artificial value anyway

[AuMatar]

THere's actually metrics for this that many internet companies report- Monthly Active Users and Daily Active Users. The number of unique users that use the site on an average month/day. That's what smart advertisers (and investors) look at rather than number of signups.

Duh.

[Anonymous Coward]

When you buy stock you are buying a real ownership stake in a real company.

When you gamble, you aren't buying any property...you are buying a chance to roll dice.

That difference should be obvious. They are both risky, but in one you buy something in real, in the other you buy a roll of dice.

Re:Duh.

[tehcyder]

You can compare them this way. If you have 100 times overvalued company, your stock has a 1% chance of winning, 99% of the owners are just playing a ponzi scheme and will never cash out.

*cough* apple *cough*

Re:Duh.

[tehcyder]

ffs, capital gains should be at least on par with income tax.

But then the truly rich would be paying tax at the same rate as the little people, and that's communism.

You know what I always say about twitter...

[moosehooey]

FUCK TWITTER!

That makes no sense.

[Anonymous Coward]

Inarguable fact: day traders, and HFTs, are making and selling stocks at a rapid pace.

Even if what they do is harmful, and even if it makes stock prices fluxuate even more randomly than they otherwise would, and even if their whole strategy is essentially based on luck....they are still buying and selling real stakes in real companies.

"Gambling" is when you buy a lottery ticket.....a lottery ticket is not a real stake in anything...it is a chance to win money and nothing more. Same goes for other gambling game types.

That is the difference that makes one legal in places where the other is illegal. And it is a perfectly reasonable difference if you don't try to play bullshit semantic games.

Re:That makes no sense.

[tehcyder]

Inarguable fact: day traders, and HFTs, are making and selling stocks at a rapid pace.

Even if what they do is harmful, and even if it makes stock prices fluxuate even more randomly than they otherwise would, and even if their whole strategy is essentially based on luck....they are still buying and selling real stakes in real companies.

"Gambling" is when you buy a lottery ticket.....a lottery ticket is not a real stake in anything...it is a chance to win money and nothing more. Same goes for other gambling game types.

That is the difference that makes one legal in places where the other is illegal. And it is a perfectly reasonable difference if you don't try to play bullshit semantic games.

The real point is that being able to buy and sell and buy and sell and...in microseconds does absolutely nothing to help the real companies involved. It does not increase their liquidity, or ability to borrow money to make real things, or anything else that stock markets are supposed to do..

Re: That makes no sense.

[unrtst]

"Gambling" is when you buy a lottery ticket.....a lottery ticket is not a real stake in anything...it is a chance to win money and nothing more."

Uh no. A lottery ticket is a stake in the lottery.

You're both wrong.
Don't confuse "Gambling" with the lottery. They're similar but different beasts.
Playing the lottery is a way to donate money to a cause with a small chance of being rewarded for being such a generous person (/end_huge_exaggeration).

Each lottery is different. Search google for "where do lottery proceeds go". For example, for PA:
http://www.palottery.state.pa....
62% -> winners
29% -> benefit programs
7% -> retailer and vendor commissions
2% -> operating expenses

The church I went to as a kid had a yearly festival, and a 50/50 raffle. 50% to the winner, and 50% to the church. I think that's an important distinction because, if you're ok with donating to that end result, then it doesn't feel bad at all to write off that $20 you just put in there. On the other hand, if the proceeds go to a casino, it's quite a stretch to think anyone is truly happy with the casino taking their money.

I'm not saying you should pick one beneficiary over another, but you make an educated decision, and the proceeds should be part of that decision.
Who do the proceeds go to when playing the market?

Why are they asking the exchange to halt trading?

[fred911]

When listed securities are traded with one specialist who has the ability to halt trading in order to match buyers and sellers and maintain an orderly market. Specialists don't have to ask to stop the market, they halt it until they can figure out what the market is pricing it at (keeping it orderly and making the spread).

It wasn't the tweet...

[bobbied]

It was the EARNINGS numbers that tanked the share price...

The tweet was just premature because most companies release earnings AFTER the market closes.

The drop in the share price would have happened after the earnings miss anyway, so it wasn't the tweet.

Earnings

[Etherwalk]

Value is entirely based on perception.

Value is based on profit. Profit is disclosed each quarter. This tweet didn't cost $8B; the title is grossly misleading. The quarterly earnings cost $8B in valuation, and the tweet just pushed the loss up an hour or so.

Re:Earnings

[Trongy]

Twitter isn't profitable. Therefore it's value is based on perception, i.e. the belief that it will someday become profitable.

I do agree that the title is misleading. If the earnings report had been release at the normal time the price would still have dropped. This happens all the time with stocks. There possibly was a stampede on this occasion, with people trying to sell quickly to beat the market.

Re:Earnings

[tehcyder]

Value is entirely based on perception.

Value is based on profit. Profit is disclosed each quarter. This tweet didn't cost $8B; the title is grossly misleading. The quarterly earnings cost $8B in valuation, and the tweet just pushed the loss up an hour or so.

No, the theory is that value is based on discounted future cash flows (profits), but the reality is that a company like Amazon has a huge market valuation despite making effectively no profit ever, and a company like Apple appears to be valued on the basis that its profits can go on increasing year on year to infinity.

Re:Earnings

[Actually, I do RTFA]

There is a real difference between announcing numbers at 4pm and 5pm. In one case, trading immediately reacts and there is a crash because of momentum traders. At 5pm, the markets are closed, and the crash is anticipated. Therefore, there is less automated collapse.

Why Wall St. guys get paid so much to let computers do their work for them, I have no idea.

In fairness

[forbin_meet_hal]

Missing earnings estimates wiped out the $8B in market value, not the tweet.