Twitter Tumbles Again After 'Lock-Up' Period Expires

The social media company's stock dropped sharply after being public for six months.
6:06 | 05/06/14

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Transcript for Twitter Tumbles Again After 'Lock-Up' Period Expires
-- -- -- Shaking another tumble today falling to its lowest pricing levels since the IPO back in early November. Here to explain why to break it all down Jeff MacKey from Yahoo! finance Jeff what happened today. Yeah Ike's pond down 18%. On enormous. Volume. -- it was a battering tumble -- -- nice not because it's not a violent enough term Michelle about -- it's nice to see you good afternoon. They had this big guy again tumbled -- -- justices is getting dragged by my car buyer -- this is -- free fall -- -- plummeted to boot stopping at its hideous. So let's take a look at the today Twitter stock chart I'm gonna let you talk about all the ugliness that we see on that. Well. See what you -- Agassi that liners -- they had their first little jot down is is where all the people who wanted to hold came in and they said earnings didn't look that bad we're gonna go ahead by the -- And to -- was the end of six months -- been public for for now 180 days which allows insiders to sell. And that means that potentially a bunch of shares to come on the market now it's not clear how many of those folks were selling today. But apparently some of them -- and Wall Street was afraid that some of these -- insiders who. Would flood the market where shares and the race was on right now we just have us a full fledged -- -- and Twitter shares. There's not a lot of compelling reason to buy -- happy half birthday by the way -- shareholders. Six months out -- in the market today but there's not a lot of reasons to buy and there's an awful lot of reasons the book profits if you're one of those early investors. And so these things just become self fulfilling prophecies on Wall Street arcade. Our people running from Twitter because they think it's -- or parties early investors just doing what they always do in the lock -- expires. Cashing in. Well there's Wall Street and here's what's happening people -- -- running from Twitter like scalded champs in terms of shareholders they can't run faster way I mean it's it's oddly they're they're screaming they're fleeing. But in terms of what the company itself is doing those or suffer operations Twitter. What they have as a real valuation problem the company came out when they originally were gonna do their IP on the solid -- they talked about being a twelve to fifteen billion dollar corporation. That seemed -- rich but not after a Twitter came out and went public and finally hit somewhere around 4050 billion dollar valuation. That was just way -- -- that that would give Porter value of about eight bucks for man woman and child on the face of the earth. That seemed aggressive and so now that bad the rugs and pulled out from under their shares there's no telling where the stock is gonna finally bottom out. But Twitter originally was offered for insiders they were buying this IPO 126 bucks a share we're still five dollars above that level. Which is why some of those folks if you've got -- for 26 dollars a share. It seems like -- the better part of valor. In the investing side of things because there there's not a -- did not take off profits at least that's the thinking when you get that kind of group think on Wall Street so is the -- -- -- rational. You know kind of it seems irrational but in terms of a full fair valuation for Twitter all bets are off no one really knows and of course you know. They still had a few moves up their sleeve the nagging issue for Twitter and -- to Graham. As well as how can they sell ads on it but -- just announced something interesting and different. Partnering with Amazon. Why is -- only -- would have created a product with a link to Amazon product pops up you can reply to that message -- -- hash tag Amazon cart. Break that down for us. Well it's it's just like you -- -- -- you mention a product and one of the ways they've been trying to do it where Scott -- they -- they robbed for the company has been. It's incredibly sticky once you're on -- and they have a lot of folks. With their networks of France talked about products goods and services TV shows. But they haven't had a way to translate that into sales now -- -- at Amazon provides literally a link between the two between those two conversations for instance. If you wanted to buy clash of the comments for your Kindle machine which -- a book by -- on sale right now. You could link to that and folks could just go to Amazon cart and by the book and and translate that conversation on Twitter into actual revenue. It's we're making money from it and that's not so clear. Like a lot of things involve a Twitter it seems cool it seems compelling. But we don't really know how much cash they're making Amazon does 75 billion dollars in sales a year they don't need this quite as much as -- us. So a lot of investors thought Twitter would be the next FaceBook is anyone still thinking that and does -- really matter why the sell off is perception is playing a role in at this point in the stock. Well it's it's not clear that Facebook's next FaceBook at this question -- -- we talk about FaceBook like they're. -- long time established orders just finding its own way it's gonna be that for better or worse. It's going to be its own thing it's not like FaceBook these companies get richer. At some point you stop having to compare them relative to Wideman each other and they're just free standing entities. Always say apple and Microsoft they're not the next version of either one of on their just their own independent companies in terms of the psychology in the self fulfilling sell off. Right now what happens with a lot of -- starters one of the reasons that insiders are often loath to take companies public despite the -- that they get. Is the fact that this becomes a tremendous distraction for the people at Twitter right now you have everyone who works with and Twitter. Looking casting furtive glances apotheker. And realizing that their network is going down they can pretend like that doesn't matter they can say these -- only paper losses but you know what it -- just like the real thing. It becomes operational distraction Twitter has to keep -- -- on the ball and grow and become what ever they're going to be going forward. And what that could be worth I don't know it depends on on very breach of adoption that they get. -- in the marketplace Twitter hasn't just been they have been growing as fast as Wall Street would like to see or is fast the company needs to grow. To justify this valuation on what's called -- total cash flow basis. Just meaning cash on the barrel -- what's the company worth. Jeff MacKey of Yahoo! finance thanks for breaking that down for us. Even -- story -- -- with for your latest headlines I'm Michelle Franzen in New York.

This transcript has been automatically generated and may not be 100% accurate.

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