Twitter's stunning turnaround

Twitter is one of the hottest stocks on Wall Street this year -- and now the company is hoping to cash in by selling ...

Posted: Jun 7, 2018 5:18 PM
Updated: Jun 7, 2018 5:18 PM

Twitter is one of the hottest stocks on Wall Street this year -- and now the company is hoping to cash in by selling $1 billion of bonds that can eventually convert into Twitter stock.

The offering is geared toward big institutional investors, such as mutual funds and hedge funds. Twitter priced the offering on Thursday, and shares fell 2.5%, possibly because more stock hitting the market could dilute the value of existing shares.

But make no mistake: The social media platform still has momentum on its side. Twitter's stock is up more than 60% this year, and prior to Thursday's drop, Twitter shares had been on a 10-day winning streak.

Why are investors flocking to Twitter? It looks like Twitter's strategy to embrace live video is a hit with users and advertisers. Twitter reported an actual profit for the past two quarters and user growth has accelerated.

That's why Twitter's stock has easily outperformed top rival Facebook, which is up 6% in 2018, and it's trouncing struggling Snap Inc. The parent company of Snapchat is still down 15% this year, despite a 10% surge in the past week.

Twitter was also just added to the S&P 500, which proves that the little blue bird is now a blue chip American firm that is finally starting to grow up.

Typically, the people in charge of adding stocks to the S&P 500 have been loathe to add companies that are spending recklessly and losing money in the process. Twitter's recent profitability is a sign that it is no longer considered a perennial also-ran.

The S&P 500 inclusion also means that the scores of S&P 500 index funds -- both mutual funds and ETFs -- that track the S&P 500 now have to buy the stock.

Related: After the financial crisis, Silicon Valley overtook Wall Street as the place to be

Still, should investors be worried that Twitter is going to add to its debt load with the $1 billion sale? Not necessarily. For one, this isn't Twitter's first go-around with a convertible offering. It sold $935 million in notes in 2014.

And interest rates are still near historically low levels even as the Federal Reserve has been raising rates and signaling that more hikes are on the way. That's a big reason why many companies have been issuing bonds.

Even the mighty Apple, which has more than $267 billion in cash on its balance sheet, has been taking advantage of low interest rates to borrow more money. Apple's long-term debt load topped $100 billion in its latest quarter.

So what does Twitter plan to do with the money from the bond offering? The company said a chunk of it will be used for "general corporate purposes" -- which could mean more capital investments, acquisitions or even the purchase of other companies.

But if Twitter uses some of the proceeds to invest even more in video and other new features that can help grow the company's user base, than Wall Street may continue bidding the stock higher.

Related: Why a Lloyd Blankfein tweet launched more Twitter takeover talk

It's a stunning turnaround for Twitter, especially when you consider that it wasn't that long ago that some (this reporter included) thought that the other company Twitter CEO Jack Dorsey runs -- mobile payments giant Square -- had a brighter future.

Twitter's market value is now $29 billion, compared to $24 billion for Square. But Square is still doing extremely well too. Its shares are up 75% this year.

In fact, analysts at Bespoke Investment Group pointed out in a recent report that Twitter and Square are even outperforming all the vaunted FAANG stocks this year, with the notable exception of Netflix, which is up nearly 90%. (Facebook, Amazon, Apple and Google owner Alphabet make up the rest of FAANG.)

"How quickly things can change. Jack Dorsey was being heavily criticized for trying to run two companies at once last year at this time. Now? Crickets," the Bespoke analysts wrote.

Minnesota Coronavirus Cases

Data is updated nightly.

Confirmed Cases: 25870

Reported Deaths: 1097
CountyConfirmedDeaths
Hennepin8738633
Ramsey3189134
Stearns204714
Nobles15585
Anoka147073
Dakota138859
Washington67033
Olmsted65411
Kandiyohi5051
Rice4802
Scott4552
Clay43529
Mower3662
Wright3322
Todd3300
Sherburne2482
Carver2242
Benton1813
Steele1670
Blue Earth1480
Martin1325
Freeborn1300
St. Louis11814
Pine900
Nicollet8810
Winona8015
Watonwan780
Cottonwood770
Carlton750
Crow Wing754
Unassigned7411
Lyon711
Otter Tail710
Goodhue704
Chisago641
Polk612
Itasca5610
Dodge530
Chippewa511
Morrison480
Le Sueur461
Meeker450
Douglas440
Becker410
Jackson400
Murray390
McLeod370
Isanti350
Waseca270
Rock230
Mille Lacs221
Pennington210
Faribault200
Swift190
Wabasha180
Beltrami180
Brown172
Fillmore171
Sibley160
Norman140
Kanabec121
Marshall120
Cass122
Pipestone120
Wilkin113
Aitkin110
Wadena100
Pope90
Koochiching90
Big Stone80
Lincoln60
Mahnomen61
Yellow Medicine60
Redwood60
Renville50
Traverse40
Grant40
Red Lake40
Clearwater30
Hubbard30
Lac qui Parle30
Roseau30
Houston20
Stevens10
Lake10
Kittson10

Iowa Coronavirus Cases

Data is updated nightly.

Confirmed Cases: 20264

Reported Deaths: 574
CountyConfirmedDeaths
Polk4406134
Woodbury281737
Black Hawk175946
Linn96779
Dallas92924
Buena Vista9181
Marshall90118
Johnson6169
Wapello60714
Muscatine56341
Crawford5422
Tama40828
Scott36810
Dubuque35121
Louisa34611
Pottawattamie29610
Sioux2900
Jasper26317
Wright1940
Washington1928
Warren1530
Plymouth1392
Allamakee1204
Story1181
Mahaska9712
Poweshiek918
Henry722
Bremer696
Boone670
Des Moines661
Clinton651
Clarke640
Taylor590
Guthrie533
Cedar491
Hamilton450
Benton441
Webster441
Monroe385
Shelby370
Jones370
Cherokee360
Marion340
Clayton343
Osceola340
Iowa330
Buchanan330
Jefferson330
Cerro Gordo301
Madison292
Lee280
Davis270
Fayette270
Dickinson270
Harrison260
Sac250
Lyon250
Monona250
Winneshiek240
Clay210
Grundy200
Mills200
Floyd191
Emmet190
Hardin190
Lucas191
Delaware191
Humboldt181
Butler171
Hancock160
Franklin150
Page140
Pocahontas140
Ida140
Keokuk140
Appanoose143
Audubon131
Jackson130
Greene130
Kossuth130
Carroll130
Chickasaw120
Cass120
Howard120
Winnebago110
Adair90
Union90
Van Buren90
Montgomery81
Adams70
Palo Alto70
Calhoun40
Fremont40
Ringgold40
Mitchell40
Worth30
Wayne10
Decatur10
Unassigned00
Rochester
Clear
78° wxIcon
Hi: 86° Lo: 62°
Feels Like: 79°
Mason City
Clear
79° wxIcon
Hi: 89° Lo: 64°
Feels Like: 81°
Albert Lea
Clear
79° wxIcon
Hi: 87° Lo: 63°
Feels Like: 80°
Austin
Clear
81° wxIcon
Hi: 89° Lo: 65°
Feels Like: 83°
Charles City
Clear
82° wxIcon
Hi: 90° Lo: 65°
Feels Like: 83°
Another round of severe weather tonight
KIMT Radar
KIMT Eye in the sky

Community Events