Twitter Investors Scared Off By Facebook Privacy Concerns

Facebook, Inc. FB is in the middle of a media storm this week after reports that personal data of more than 50 million users was shared with a company connected to the Trump 2016 campaign without authorization. Despite a horrible week for Facebook, Twitter Inc TWTR’s week has been even worse.

Sympathy Move

Early in the week, it seemed as if social media competitors were trading down in sympathy with Facebook as investors feared a potential regulatory crackdown on the data that it critical to the social media advertising business.

On Monday, Facebook stock plummeted 6.5 percent, dragging down Snap Inc SNAP by 3.5 percent and Alphabet Inc GOOG GOOGL by 2.7 percent. On Tuesday morning, it appeared as if Twitter was holding up relatively well, but that all changed when the stock tanked 10.3 percent on the day and is now down roughly as much as Facebook over the past five trading sessions.

But Why?

Part of the issue may be that, much like Facebook, Twitter has faced tremendous backlash related political propaganda and abuse. The Facebook story this week suggests campaigns may have gone even further than investors realized in taking advantage of social media users.

Another potential explanation is that Twitter has struggled to establish its advertising business and doesn't have the reputation and track record to bounce back from a potential regulatory crackdown.

Some traders have even speculated that Tuesday’s big move was technical in nature, with the stock up more than 40 percent year-to-date prior to the drop.

$TWTR down 10% today is normal given the bearish divergence in momentum as price hit a confluence of resistance. (Today's action not shown). pic.twitter.com/Dlifs20O4y

— Tom Bruni (@BruniCharting) March 20, 2018
 

Twitter’s struggles on Wednesday may be related to a report from Bloomberg that Israel is considering suing the company after it has repeatedly failed to remove content that supported acts of terrorism against the country.

The most likely explanation is that Twitter is suffering from all of the above and traders are simply taking their profits and looking for better opportunities elsewhere.

Whatever the reason, Wednesday’s trading action suggests the near-term selling pressure may have been exhausted for the time being. Twitter shares were trading higher by 3 percent and opened above $32 per share..

Related Links:

Analysis: The Facebook Data Controversy, And Why Wall Street Could Take It Harder Than Washington

Facebook's Data-Driven Sell-Off Weighs On The Markets