Shares of Twitter (NYSE:TWTR) were crushed after the social network reported lackluster second-quarter earnings. With the stock now trading near all-time lows and closing in on its IPO price of $26, some investors might be thinking about buying the stock.

In a previous article, I discussed three main reasons investors should avoid the stock: dismal user growth, money-losing ad strategies, and oversized stock-based compensation. Today, I'll highlight one more reason: insiders are dumping boatloads of shares.

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$103 Million in 3 months
According to SEC filings, Twitter's insiders sold $103 million in shares over the past three months -- $31.6 million in July, $28.5 million in June, and $42.8 million in May. The biggest seller during that period was former CEO Evan Williams, who sold $93.6 million in shares.

Last April, former CEO Dick Costolo, interim CEO Jack Dorsey, and Williams all stated that they had "no current plans" to sell shares in the company when the lockup period expired the following month.

But a few months later, Costolo set up a plan to sell shares through his family trust. By November, the trust had dumped 50% of its shares. Costolo has sold another $37.3 million in shares since then. One institutional investor, quoted by Business Insider, accused Costolo of "grabbing a lifeboat" as the company sank. Only one insider, CFO Anthony Noto, bought any shares at all over the past year, buying about $473,000 in shares back in May.

Perfect timing?
Twitter's insider sales, particularly Costolo's, coincide with the company's introduction of "direct response" ads last summer. Those ads let advertisers simply pay for the clicks that they wanted -- like gaining new followers, conversions to a website, or collecting email addresses. Twitter thought that this strategy would attract a larger number of smaller advertisers. Instead, it convinced existing advertisers to pay less for fewer clicks. As a result, Twitter now only expects its full-year revenue to rise around 60% this year -- down from 111% growth in 2014.

During Costolo's last year as Twitter's CEO, he introduced a plethora of new features, such as Instant Timelines, group chats, video editing tools, logged-out experiences, and e-commerce initiatives. Unfortunately, Dorsey told investors during last quarter's conference call that none of those had a "meaningful impact on growing our audience or participation." Last quarter, Twitter's year-over-year monthly active user (MAU) growth also hit its lowest point since the company went public. With new initiatives failing and user growth peaking, it's easy to see why Twitter insiders are so eager to sell their shares.

Look on the bright side
The future might look gloomy for Twitter, but there are potential catalysts on the horizon. "Project Lightning" will curate event-based content into news stories with tweeted photos and videos. According to Pew Research Center, nearly half of Twitter users under 35 rely on the site as a primary news source.

Twitter also has room to grow in video ads, since research firm iProspect claims that more users finish watching an entire video on Twitter than Facebook (NASDAQ: FB). Its data licensing business, which accounted for 10% of its top line last quarter, is also growing at a healthy rate. 

What investors should do
Insider sales are significant, but investors shouldn't completely base their investment decisions on them. Insiders have plenty of other reasons to sell their stock, which aren't disclosed in SEC filings.

Insiders at other social networking companies are also selling lots of shares. Facebook insiders, for example, sold over $35 million in stock in July alone. Yet fewer people focus on those sales, since Facebook stock has soared 30% over the past 12 months while Twitter's has plummeted 34%. Therefore, it's easier to claim Facebook insiders are merely taking profits while Twitter insiders are desperately "dumping" the stock.

Regardless of the significance of insider sales, I don't think Twitter is a compelling buy at current levels. The company faces too many headwinds, and it hasn't offered any clear plans for the future. Twitter certainly won't completely fade away anytime soon, but I believe that the stock could fall much further before bouncing back again.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.