World Economy

Twitter Is Junk

Twitter Is JunkTwitter Is Junk

US ratings agency Standard & Poor’s has given the debt of social media giant Twitter the rating “junk”, BBC reported.

S&P said Twitter’s $1.8 billion September debt issue were worthy of a “speculative” rating of “BB-”, three notches below investment grade.

News of the rating sent New York listed Twitter shares tumbling nearly 6 percent.

The social network’s push for acquisitions despite slow earnings growth was behind the low rating.

In its rating, S&P analyst Andy Liu said, “The unsolicited ‘BB-’ corporate credit rating incorporates our assumption of healthy growth in monthly active users and revenues, the possibility of positive discretionary cash flow in 2016, and ongoing minimal debt leverage.”

S&P’s “unsolicited” rating meant it was initiated by S&P and may be based only on publicly available information and may not have included cooperation from the company.

Just last week, Twitter announced that it was opening an office in Hong Kong despite being banned from operating in mainland China to grow its advertising and sales reach.

In October, Twitter reported a disappointing 7 percent fall in timeline views per user - a closely watched measure of engagement - despite a 23 percent growth in its user base in the third quarter.

The company also said its fourth-quarter revenue might fall short of market expectations of $448.8 million.

S&P said it could raise the rating if Twitter broadened its revenue sources, launched new products and maintained its market share, along with improving its profitability, and cash flow.

But, it also added that the rating could be downgraded still lower.

Twitter shares gave up most of the 7 percent gain after the company announced it was considering creating additional mobile applications beyond its core messaging service and video app.