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Twitter Stock Plummets as User Base Shrinks

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Shares of social media platform Twitter (NYSE:TWTR) plunged dramatically on Friday following the company’s second quarter earnings report. Although the company actually posted an appreciable profit for the quarter, investors turned sharply negative on the stock on the news that the platform’s user base had actually begun to decline.

From an opening price of $42.94, shares of Twitter fell by nearly 21 percent to close the trading day at $34.13. Although Twitter is still in strongly positive territory for the year, Friday’s losses eliminated a large share of the stock’s gains from the past several months. In total, Twitter lost $6.6 billion in market capitalization during the regular trading day.

As an explanation of the decline, Twitter argued that the majority of the user loss was the result of efforts to erase fake accounts and of the European Union’s new GDPR data privacy law. Attempts by Twitter to clean up fake accounts and those that have violated the platform’s terms of service significantly reduced the total number of active accounts. Some users may also be shut out by the fact that the company decided to stop allowing tweets to be sent via SMS message, a feature that was introduced very early on in Twitter’s history.

The drop in Twitter’s share price came just one day after an even more massive plunge in shares of Facebook. In Facebook’s case, some $120 billion in overall share value was eliminated as a result of slowing growth.

Aside from the loss of users, though, Twitters second quarter report was fairly positive. With revenue growth of 24 percent and net income of $.13 per share, Twitter outperformed most estimates that had been made for its finances in the second quarter. This fact has led several analysts to question the wisdom of the mass selloff.

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