Twitter shares hit new lows as stock lock-up expires

• Shares of Twitter Inc sank 18 percent to a new low in frenzied trading on Tuesday, wiping out more than $4 billion of its market value, as early investors sold stock in the messaging service for the first time after a six-month "lock-up" expired.
• The lock-up agreement that expired this week applied to about 470 million shares, or 82 percent of Twitter's equity, held by insiders, venture capitalists and other investors. Twitter allowed one batch of shares to be sold in February, but that lockup governed only about 10 million shares, most of which were held by non-executive employees.
• Tuesday's reaction to Twitter's lock-up expiry was in sharp contrast to that of Facebook Inc in late 2012. Facebook shares jumped 13 percent on November 14 that year, when its lock-up expiry of roughly 800 million shares did not trigger an immediate wave of insider selling.
• Twitter's shares have been trading at all-time lows since April 29, when the company disclosed sagging usage metrics.  Indeed, concerns about user growth and engagement levels have wiped out about half of Twitter's market value, more than $18 billion, since late December, even as it has hit revenue targets in the two quarters since it went public at $26 a share.

Until Tuesday, only about 80 million Twitter shares, a fraction of outstanding shares, were publicly traded. About 500 million closely held shares were unlocked for possible trades late Monday. They hit the market at Tuesday's opening bell.

This week's lock-up is the second and by far the largest lock-up period for Twitter, which also freed about 9.9 million shares held by non-executive employees on Feb. 15. The company sold about 70 million shares in its November 2013 initial public offering.

Vijaya Gadde, Twitter's general counsel, sold 3,914 shares on Tuesday at $39.09 apiece, according to a regulatory filing. Vice President of Engineering Christopher Fry sold 19,568 shares at the same price, according to another regulatory filing. Both still hold many shares, with Gadde's holdings totaling 861,642 shares and Fry's at 949,181 following their sales.

Several executives, including CEO Richard Costolo, said in an April 14 regulatory filing that they don't have "current plans" to sell shares.

"This should, arguably, help alleviate some of the potential pressure on the stock in the coming weeks," wrote Sterne Agee analyst Arvind Bhatia in a research note before the lock-up ended.

But Twitter stock nonetheless fell more than 16% to about 32.35 by late afternoon on the stock market today. The stock's trading about 57% off its all-time high of 74.73 on Dec. 26.

Tuesday's trading volume flew north of 100 million shares in late-afternoon trading, about 8x the company's daily average of 13.2 million shares.