Twitter Inc (TWTR): Will The Management Shake-Up Move The Stock

twitterTara Clarke: Twitter Inc. stock (NYSE:TWTR) surged more than 4% Thursday morning on news of Chief Operating Officer Ali Rowghani’s resignation.

Rowghani will shift into a strategic advisor role, and Twitter confirmed the COO spot will remain vacant.

One major factor likely behind the management shake-up is the microblogging site’s sputtering user growth. A troubling Q1 2014 earnings report on April 29 revealed that monthly active users (MAUs) – the lifeblood of Twitter – were lackluster, with only a 6% gain since last quarter. And the previous quarter saw only a 3% growth in MAUs. The report also showed that TWTR’s net loss grew by more than $100 million. Twitter stock fell more than 8% that day.

“The fact that the stock got beaten down [after Q1 earnings release] is not surprising because I think the run-up based on any metric was out of whack,” Columbia Business School assistant professor of finance and economics Moshe Cohen said to Slate. “Twitter is a very interesting company, the space is very interesting, but there’s still a significant uncertainty and risk as to how to monetize the platform.”

In an appearance on FOX Business’ “Varney & Co.” on Dec. 30, when TWTR was trading for more than $60 a share, Money Morning Chief Investment Strategist Keith Fitz-Gerald predicted Twitter stock was in for a rough ride.

“Customers are leaving in droves, you’ve got a complex thing they can’t monetize, and the next best thing is a click away,” Fitz-Gerald said.

Besides a push to improve its numbers, the other reason for the management shake-up is likely Rowghani’s loss of favor among Twitter staff.

On May 6, TWTR’s six-month lock-up period expired, allowing insiders to sell stock following the company’s Nov. 8, 2013, initial public offering (IPO). Re/code reported that Rowghani’s sale of 300,000 shares of Twitter stock for $9.9 million in profits that day created severe internal tension – it went against other Twitter insiders’ vow not to sell as a signal of confidence about the company’s future.

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