Twitter rated as ‘junk’ by S&P, shares drop 5pc
shares dropped more than 5pc on Thursday after Standard and Poor’s rated the
social network’s debt as “junk”.
The credit ratings agency gave Twitter a BB- rating, three notches below
investment grade, and said the Californian company had a “fair”
S&P said Twitter needs to boost revenues in overseas markets before the
agency would consider raising the rating.
“We could raise the rating if Twitter broadens its revenue sources
through international expansion and new product launches, maintains its
market position, continues to improve its profitability, and achieves
positive and sustained discretionary cash flow in excess of $100m in 2016,”
S&P said in a note.
“The company is investing very aggressively in growth. Depending on the
level of business reinvestment, Twitter may not generate positive
discretionary cash flow until 2016.”
However, the agency put a stable outlook on the company as it expects it “to
experience very strong growth and not encounter a significant increase in
Twitter’s shares fell 5.3pc to $40.30 in afternoon trading in New York on
The “junk rating” came just a day after Twitter
unveiled new features in a bid to attract new users and make the
site easier to use.
Users will be able to upload and tweet videos from next year and change the
way tweets are shown so people are shown messages more relevant to them.
Kevin Weil, vice-president of product at Twitter, wrote
in a blog post: “Right now, what you see of the 500m tweets
published every day is based entirely on who you follow, and that’s a great
model for many people. But with that many tweets every day, there’s no way
even the most avid Twitter user will find everything that’s relevant to
their interests in any particular moment.
“That’s why we’re exploring ways to surface relevant tweets so the content
that is interesting to you is easy to discover – whether you stay on Twitter
all day or visit for a few minutes – while still preserving the real-time
nature of the platform that makes Twitter special.”
Another announcement was the ability to include tweets in direct messages, to
allow two people to privately discuss an individual message more easily.
Last month Twitter
revealed it had attracted millions more users in its third quarter,
helping the company to post much higher revenues.
The company reported 284m monthly active users in the three months to
September 30, up 13m on the previous three months and a rise of 23pc from
the same period last year. However, just 3m of the 13m new users who joined
Twitter during the three-month period were from the US.
Twitter said revenues hit $361m, double the amount in the same period last
year and beating analyst expectations of $351m. Profits were in line with
estimates at $7m.