By Josh Haner/The New York Times/Redux.
By last summer, Twitter’s stock was looking as forlorn as Donald Trump’s hair stylist. In May, analysts had been warning investors to dump the beleaguered stock, or avoid buying new shares at all. Bank of America had downgraded it from “neutral” to “sell”; JPMorgan had lowered its rating, too; and several others had followed suit. Twitter’s stock chart accurately reflected the company’s narrative. When co-founder Jack Dorsey was named C.E.O. almost a year earlier, in October 2015, the stock was expected to rise dramatically. Instead, absent any meaningful innovations or new products, it fell by half.
But then, in early September, something exciting happened. Twitter’s stock experienced what investors call a “golden cross.” In Wall Street parlance, a golden cross is when a stock’s 50-day moving average crisscrosses above the stock’s 200-day moving average. It’s one of those rare predictors that show what might happen to a stock in the future, and in this instance, it suggested a forthcoming spike. Initially, the analysts were vindicated. The stock rallied a little, and it began to head upwards.
But now, it turns out, this was a false hope for Twitter, which has since plummeted to previously unforeseen depths. After a high of $69 in 2014, the stock is now trading at around $16. The only thing that has prevented Twitter’s stock from falling to single digits over the past few months has been the multifarious rumor of a possible acquisition. At first, Salesforce was going to buy it. Then it was AT&T. Then Disney, or maybe it was Apple? The company was going to sell for $10 billion, and then it wanted $30 billion, but in the end, Twitter never sold, possibly because potential acquirers feared that buying Twitter would be like getting into bed with a feral troll.
The failed sale, however, has been the least of Twitter’s headaches. Since that golden-cross moment there have been layoffs and more criticism lobbed at the company than I’ve seen during my decade covering the ever beleaguered social network. Perhaps most terrifying for investors has been the mass exodus of top talent. There was the departure of Adam Bain, the company’s C.O.O. and the brains behind many of Twitter’s most successful ad products; the company’s C.T.O. left; and so did the vice president of product (a job that has been likened to the jinxed “Defense Against the Dark Arts professorship” from the Harry Potter saga, where every professor ends up dead or ousted at the end of the school year). Sure, people leave companies all the time, but these positions had already seen top-level executives leave as early as just a few months prior. This week, Twitter’s China chief left after just eight months.
VIDEO: Bob Iger and Jack Dorsey on Content in the Digital World at the V.F. New Establishment Summit
A number of reporters, myself included, have castigated Twitter for the company’s facilitation of the ascendance of Donald Trump. Every social network experienced their share of trouble during the election cycle, but Twitter has seemed impervious to its trolling problem in a way that was particularly troublesome. In 2015, Dick Costolo, the former C.E.O., aptly noted, “We suck at dealing with abuse.” Since then, of course, things have only gotten worse.
More recently, however, some investors and Twitter faithful have thought that Trump’s improbable victory might help the company explode with new users—Trump supporters and antagonists, alike. (For some time, Twitter has struggled to grow beyond its 317 million or so monthly active users.) But, realistically, tens of millions of people aren’t going to join Twitter simply to hit refresh on @realDonaldTrump’s feed. More important, even after more than 62 million Americans somehow voted for Trump, he still only has 18 million followers on Twitter, a large percentage of whom are actually bots. A random Kim Kardashian West tweet gets more interaction than a grammatically incorrect 140-character gaucherie from Trump. (Also, I suspect that people are going to soon grow bored of Trump’s puerile tweets. I hope they are. I know I have!)
If anything, Trump has become another headache for Twitter. Some in Silicon Valley have relayed to me that they wouldn’t work at Twitter precisely because of the platform it has afforded the incoming president. Early employees at Twitter have also said to me that they regret being involved in a company that would become a vessel for an army of alt-right trolls. One early Twitter developer recently told me that one of his biggest regrets in his career was not building some sort of design mechanism that could have helped Twitter extinguish its troll problem. If he had, we almost certainly would be living in a different sort of world.
It’s been a miserable year for Twitter, but it seems like the next year will be even worse. Not only does Dorsey have to fill all these executive-level positions, continue to try to entice new users, grow revenue in a post-Bain world, fend off a class-action lawsuit that alleges the board misled investors, hire from the shrinking pool of people who want to work at Twitter, and fix a product that is so broken many see it as beyond repair, but he will also have to continue to justify running both Twitter and Square to the boards of both companies. (Thankfully for Dorsey, Square seems to be doing much better than Twitter, with its stock on the rise for the past several months, though this could also be indicative of the problems Twitter faces.)
Last summer, I flew out to San Francisco to interview Dorsey for a profile in this magazine. Dorsey had been running the company for about a year, and it was clear at the time that his management had not yielded the sort of magical turnaround that many on Wall Street had anticipated. At the time, I was curious whether Twitter, or Dorsey as a co-founder, had a plan B in place in case his tenure did not work out. But as someone on the board told me, “There is no plan B.”
That plan struck me as shortsighted. At the time I joked with Dorsey, “Do you ever look at the Twitter stock chart on your phone and turn it upside down and dream of a day?” He laughed off my entreaty, but these days something more ominous is taking place. It appears that, in terms of Twitter’s stock, the company’s short-term average price could end up crossing below its long-term average—a phenomenon known on Wall Street as a “death cross,” and I don’t need to tell you what that term means on Wall Street.
Indeed, Twitter is caught in a strange place. While other social networks, such as MySpace and Friendster, have gone from being white hot to disappearing into digital dust, Twitter remains relevant. Tweets are mentioned in the most important news stories online every single day (partially thanks to Trump’s love of the platform). If relevance were the barometer of the company’s success, Twitter’s stock would be worth 50 times what it is today. But it’s not. Growth is. Maybe if Dorsey can focus on trying to convince Wall Street that the company isn’t going to grow all that much, but that its influence will, there could be a brighter future for Twitter. I’d personally wait for the stock to fall further before I put money on that bet.
In the meantime, Twitter does have one thing going for it: it’s dirt cheap. And if its stock continues to fall further, there may be some companies still interested in acquiring it. For some investors, the problems inside Twitter and the stagnant valuation signal that the stock could still fall a few more billions dollars. As the analyst Patrick Brik wrote last week, “I am bearish on Twitter stock because the price action is now suggesting a price objective at a new all-time low.” In other words, 2017 isn’t going to be pretty.