There are lots of good reasons why one might want to short Twitter (NYSE:TWTR). The company has no earnings, it sports a ridiculous price/revenues multiple, it suffers from a frightening user churn rate, and that's the start of the laundry list.
So why wouldn't I short it?
An Existential Question
Personally, I don't care much for Twitter as a product and have never understood its appeal.
Indeed, I confess that it's hard for me to understand why this company even exists. The communications "product" it offers is annoyingly restrictive. The sub-culture it thrives off of is frivolous and faddish. Twitter's technology and product format is easy to copy. The firm faces fierce competition from tech giants such as Google (NASDAQ:GOOG), Facebook (NASDAQ:FB) and might eventually be threatened by Apple (NASDAQ:AAPL) or Microsoft (NASDAQ:MSFT). And I could go on and on about how precarious this whole enterprise seems to be.
But that is my point: I don't get it! And quite frankly, I think that 95% of all traders out there shorting Twitter or contemplating a short don't get it either. If you asked virtually anybody that is old enough to be a serious securities analyst or investor, they would have told you five years ago that this company did not stand a chance to survive. And they would have been wrong.
So back to why I would never short this stock. There is a very wise adage that says that you should never invest in a company that you do not understand.
And here is a corollary: NEVER, NEVER, NEVER short a stock that you do not fully understand.
The only thing that is relatively clear to me is that Twitter is a modern social phenomenon. But will it endure? Twitter could become relegated to the ash heap of the history of frivolous fads, or it could become a cultural fixture and/or evolve in ways that allow it to do so.
I won't even begin to answer that question because I don't understand Twitter's present; therefore it would be foolish for me to pretend to know what the future holds in store for the stock of this company. And I doubt that very many people of a certain age and background can understand it either.
For most of us who have a certain amount of experience in the investment business, this is a very good reason to forswear any investment in Twitter. And it may be the single best reason NOT to short Twitter.