Twitter gets junk bond rating sending shares down

Twitter, which has been under pressure because of slowing user growth and management turnover, has been given a speculative-grade credit by Standard and Poor’s.

The company and its $1.8 billion of convertible notes were given a rating of BB-, three levels below investment-grade, according to a statement from the credit-ranking company. S&P also said Twitter’s financial risk was “significant.”

Shares continued to decline after the statement, falling 5.9 per cent to $40.04 at the close in New York yesterday.

Twitter’s potential for growth remains strong and leads to a stable outlook, S&P said. S&P, which usually gets paid by borrowers to assign a rating, said this assessment was unsolicited.

“The company will need to make continual, sizable investments in its products and services to ensure growth and innovation, as well as maintain its relevance with its users,” S&P analysts led by Andy Liu wrote in the note. The San Francisco-based company has been under pressure because of its slowing user growth and management turnover.

Twitter’s monthly active user count rose 23 per cent to 284 million in the third quarter, down from 24 per cent growth the prior quarter.

Costolo’s defense

Twitter chief executive officer Dick Costolo defended the company's prospects on November 12th at its first analyst day, saying that about 500 million people visit its website each month without logging in. Anthony Noto, who was named chief financial officer in July, highlighted charts showing revenue reaching $14 billion in 10 years while emphasising that wasn't a forecast.

“S&P’s own release says ‘the stable outlook reflects our expectation that Twitter will continue to experience very strong growth and not encounter a significant increase in competitive pressure,’” Twitter spokesman Jim Prosser wrote in an e-mail.

Bloomberg