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

[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

[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

[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

[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

[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

[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.

Twisted perception

[Taco Cowboy]

Value is entirely based on perception

... which is often biased and/or twisted

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: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.

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: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.