Twitter nears $70 again; shorts hard-pressed to find shares

Twitter's (TWTR +2.8%) big selloff has proven quite temporary: After tumbling 17% over two trading days, shares are once more near $70, and the company's valuation once more near $50B.

With shorts having piled en masse into Twitter since its November IPO (29% of the float was shorted as of Dec. 13), there are many reports of investors either being unable to place new short orders, or of only being able to short a limited number of shares, typically at a high lending rate.

Meanwhile, Twitter engineering chief Chris Fry has provided an interview in which he shines a light on the company's decentralized engineering culture - he talks at length about giving teams autonomy to control product development, and individual engineers the chance to move between teams - and suggests upcoming products will be focused on "how people experience the information that sits at the heart of Twitter."

Fry cites Twitter's Event Parrot (provides direct messages that relay news alerts) and Magic Recs (sends direct messages that provide personalized user/content recommendations) projects as examples of such information-focused products. The efforts could help Twitter improve engagement and address the significant churn it's reportedly seeing among new users who become intimidated by the torrent of short-form updates appearing in their timelines.

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Comments (19)
  • redhat63
    , contributor
    Comments (333) | Send Message
    Not sure where TWTR will be going foward, but beware of a "sure thing" either on the long or short side.
    3 Jan 2014, 01:47 PM Reply Like
  • sid18
    , contributor
    Comments (381) | Send Message
    Amen. The only thing I'm sure about is that I'm unsure when TWTR's valuation will reflect its fundamentals.
    3 Jan 2014, 03:56 PM Reply Like
  • TotallyTotally
    , contributor
    Comments (22) | Send Message
    I think it's the Meltdown of this Year, but I'm completely prepared to be wrong. Besides, it's not like there are not a lot of other candidates for that honor.
    3 Jan 2014, 02:26 PM Reply Like
  • elouie99
    , contributor
    Comments (2) | Send Message
    You can easily get short by buying selling short dated naked calls that are in-the-money. When they get exercised a short will be assigned to you. Example, sell Jan 69 calls with Jan 03 expiry.
    3 Jan 2014, 04:15 PM Reply Like
  • elouie99
    , contributor
    Comments (2) | Send Message
    You an always short a stock by selling short-dated call options in the money. Ex. sell Jan 69 calls expiring Jan 03. When they get exercised, you'll be assigned a short position.
    3 Jan 2014, 04:15 PM Reply Like
  • Quoth the Raven
    , contributor
    Comments (2063) | Send Message
    This could be the best long-term options straddle I've ever seen.
    3 Jan 2014, 05:00 PM Reply Like
  • markrpat
    , contributor
    Comments (249) | Send Message
    qtr...would you wait until after 1st earnings report? I agree on the long term, but best to wait then go directional or straddle? I expect IV to implode one way or another into Feb.
    3 Jan 2014, 05:42 PM Reply Like
  • ilanfl
    , contributor
    Comments (114) | Send Message
    I don't see it, but I believe if you're saying that then there's truth in it.


    Can you say which expiration / strikes?


    Everything looks very expensive to me long-term.
    4 Jan 2014, 10:47 PM Reply Like
  • emailog
    , contributor
    Comments (78) | Send Message
    I am LOOOOoooooooong!
    3 Jan 2014, 05:14 PM Reply Like
  • markrpat
    , contributor
    Comments (249) | Send Message
    just a anyone besides me seeing a truncation issue with comments?
    can't read the whole comments.
    3 Jan 2014, 05:48 PM Reply Like
  • The Delivery Guy
    , contributor
    Comments (204) | Send Message
    Broadcast (TV/Radio): Advertisers blast out their message to an audience
    Search Engine: Advertisers target messages based on what audience is looking for
    Social Media: Advertisers can interact with their audience


    Pretty intriguing possiblities... I'm a value guy, but somethings are just revolutionary.
    3 Jan 2014, 06:53 PM Reply Like
  • sl100
    , contributor
    Comments (112) | Send Message
    Waste of time big boys control the tape they can take where ever it has to go, this can go to 200 too ti squeeze the shorts cray to short this tock out right, only way is do buy puts or calls. do no long or short the stock too volatile and dangerous.
    3 Jan 2014, 09:29 PM Reply Like
  • pennyln
    , contributor
    Comments (2) | Send Message
    TWTR,100.00 a share ,very soon.
    4 Jan 2014, 01:48 AM Reply Like
  • bambooman
    , contributor
    Comments (264) | Send Message
    i hate to say it, but unless you're a late 20's / early 30's, exceptionally intelligent professional day-trader - and most likely male - you probably should not be touching TWTR. sometimes it's just best to walk away and let the pros fight it out until a clearer picture emerges.


    these days i feel boring and/or beaten-down is best: GDX, HE, WU, etc.
    4 Jan 2014, 11:53 AM Reply Like
  • foodforthought
    , contributor
    Comments (221) | Send Message
    From 424B4 dated 11/7/13:



    TWTR generated $112,247 of revenue in 4Q:12 ($316,933 (full year 2012) - 204,686 (9-months ended 2012). Hence, TWTR generated 35.42% of its revenue in 4Q:12. Applying this forward to 2013, we get 2013 revenue estimate of ~$654M. (9-months ended 2013 revenue divided by the reverse of the 35.42%: $422,215/(1-0.3542) = $654M)


    $654M implies a growth of ~107% in 2013. Being generous, let's assume TWTR doubles its revenue stream again in 2014 to ~$1.3B. And, let's assume again a generous 85% revenue growth in 2015 (for those asking why 85%; don't forget of law of large numbers). That will give us 2015 revenue estimate of ~$2.42B.


    Now is the tricky part. At the high end of estimates, FB will be growing its revenue base by ~40% in 2015. TWTR's 85% revenue growth estimate in 2015 is 2.125X (85/40) that of FB's. FB is currently trading at 8.5X its 2015 revenue estimate. Applying 2.125X to 8.5X, we get a "very generous and aggressive" 2015 P/S multiple of ~18X for TWTR.


    18X multiple applied on 2015 revenue estimate of ~$2.42B yields a market cap of ~$43.56B. Diluted O/S shares is ~704M shares (and will be much higher in 2014 and 2015!) That implies current share price of ~$62. Of course, we can always argue "10% premium" on top of our very aggressive growth assumptions due to "scarcity value" for TWTR shares (float is only ~80M shares). That would imply a current share price of $~68.


    So, who is willing to pay $68 for TWTR or more? If more, what are your assumptions?..
    4 Jan 2014, 01:23 PM Reply Like
  • divinecomedy
    , contributor
    Comments (465) | Send Message
    I have a small call option position in this. Based purely on speculation. Just ride the trend and leave your common sense at the door.
    4 Jan 2014, 01:57 PM Reply Like
  • convoluted
    , contributor
    Comments (2503) | Send Message
    According to my account, I made a lot of money shorting TWTR a few days ago. I didn't feel 'squeezed.' Quite the contrary. I suppose though I should be more careful. Ok-now looking at some LEAP puts, which I'll purchase with my most fortunate short profits.
    4 Jan 2014, 02:13 PM Reply Like
  • TradesandHolds
    , contributor
    Comments (74) | Send Message
    Stunning amount of gamblers posing as investors in buying TWTR at these prices and continuing to remain invested. When it falls, stops will not honored and many will be left with a stock truly worth no more than 46, even under the most sanguine projected valuations. February will truly be a watershed event for TWTR, but I imagine it will be much lower long before that.
    4 Jan 2014, 03:03 PM Reply Like
  • 81george
    , contributor
    Comments (299) | Send Message
    Probably the most easily manipulated stock due to its small float. I am under impression that the big guts pump it up to dump at unjustly high prices and little guys who jump om the bandwagon too late at those prices will get burned badly. Any price above 70 is a good long term short.
    5 Jan 2014, 12:25 AM Reply Like
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