Prior to its recent stock price pop, upstart Twitter (NYSE:TWTR) and its shareholders had seen the company's value steadily decline for much of the past two months. There's still a long way to go before those unfortunate investors who jumped on the Twitter bandwagon during its meteoric rise recoup their losses, but a recent glut of potentially good news may turn the tide.
The question from Twitter bears, and it's a legitimate one, is whether all the good tidings of late can overcome the social media newbie's many challenges. Based on yesterday's double-digit share price jump, there are a lot of believers. But If Twitter's short trading history has proven anything since the stock rocketed to over $70 a share from its IPO price of $26, it's that investors shouldn't be too quick on the draw.
An abundance of good news
The week started well for Twitter as its senior executives, including CEO Dick Costolo and a couple of prominent board members, announced in an SEC filing that they intended to hold on to their shares despite the pending lockup period expiration. A lockup period prevents insiders from selling shares for a predetermined time frame after an IPO. The fear is that unleashing millions of new shares on the market will dilute the value for existing shareholders.
The decision from Twitter execs to delay cashing in drew a collective sigh of relief from shareholders. Of course, with the pressure Twitter and other tech stocks have been under of late, Costolo and team would have pulled the rug out from under what little support Twitter stock has by selling their respective stakes. Not to mention, the negative connotation that comes with company insiders -- especially senior management -- dumping large ownership stakes.
Social media fans may recall Facebook (NASDAQ:FB) went through much the same situation after the expiration of its lockup period at the end of 2012. Much like Costolo, Facebook founder and CEO Mark Zuckerberg also appeased investors by announcing he would hold off on liquidating large blocks of his stock, despite his right to do so.
Costolo and team weren't done sharing the good tidings, however. Yesterday, Twitter announced it would acquire longtime data analytics partner Gnip for an as-yet undisclosed sum. Twitter has worked with Gnip for the past four years, and said it plans to use the provider of social media data to "offer more sophisticated data sets and better data enrichments" to businesses large and small.
This, even more than Costolo's decision to hold off on selling his shares, provides reason for optimism to Twitter bulls. Data, as Facebook can attest, drives successful digital advertising campaigns. There's a reason that Facebook has been able to drive revenue growth without inundating its users with more and more ads: it uses seemingly unending amounts of data to better target marketing efforts, allowing the company to charge more to client companies. Quality over quantity is better for advertisers and users alike. The hope is that Gnip will move Twitter closer to being able to accomplish what Facebook already has.
As if the quiet passing of Twitter's lockup period and the Gnip acquisition weren't enough to jump-start its stock, the company scored a coup yesterday when it announced the hiring of Google director Daniel Graf as vice president of Twitter's consumer products. The hiring is seen as a much-needed step in improving Twitter's product offerings and completes the news trifecta that triggered Twitter's stock price jump.
Final Foolish thoughts
It's been a nice few days for Twitter and its shareholders, particularly after what had been a steady decline in share price the past couple of months. But does Twitter's litany of good news warrant a second look from investors? No.
How to stem the user growth slide and better monetize its service are still unanswered questions Twitter must address before it becomes a buy. Are these steps in the right direction? Sure, but for investors in search of the best social media play, Twitter still has a long way to go to catch Facebook.
Are you ready to profit from this $14.4 trillion revolution?
Every investor wants to get in on revolutionary ideas before they hit it big. Like buying stock in e-commerce pioneer Amazon.com in the late 1990s, when it was nothing more than an upstart online bookstore. The problem is, most investors don't understand the key to investing in hyper-growth markets. The real trick is to find a small-cap "pure-play" and then watch as it grows in EXPLOSIVE lockstep with its industry. Our expert team of equity analysts has identified one stock that's poised to produce rocket-ship returns with the next $14.4 TRILLION industry. Click here to get the full story in this eye-opening report.
Tim Brugger has no position in any stocks mentioned. The Motley Fool recommends Facebook, Google-Class C Shares, and Twitter. The Motley Fool owns shares of Facebook and Google-Class C Shares. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.