The shares of Twitter and Square, both companies co-founded and headed by Jack Dorsey, are crashing today—making him less wealthy. The stock price of Twitter declined more than 7% to $16.57 per share while Square was down over 11% to $9.07 per share at the time of this writing, around 3:13 in the afternoon in New York.
The real-time data from Forbes Billionaires list showed that Dorsey’s net worth dropped $113 million to $1 billion today. When the Square went public in November, he had a net worth of $1.7 billion. However, his fortune has been declining due to the volatility of the stock prices of Twitter and Square.
Exclusive: York Capital to wind down European funds, spin out Asian funds
York Capital Management has decided to focus on longer-duration assets like private equity, private debt and collateralized loan obligations. The firm also plans to wind down its European hedge funds and spin out its Asian fund. Q3 2020 hedge fund letters, conferences and more York announces structural and operational changes York Chairman and CEO Jamie Read More
Twitter impacted by global service outage
The shares of Twitter collapsed primarily due to the global service outage of the company’s service. The microblogging site already suffered three outages within five days.
The outages are harming Twitter’s revenue and user satisfaction as the company struggles to boost its user base. Some analysts covering the stock recommended a Sell rating.
In a blog post last week, Charles Sizemore, a principal at Sizemore Capital Management, wrote that Twitter is included in his top ten stocks to sell “before things get really ugly.”
On the other hand, Mathew Tuttle, CEO of Tuttle Tactical Management, commented that Twitter is now “below its IPO price, and virtually everyone who has bought the stock since the IPO has lost money.” He added that the company has “many structural problems and must do something significant to encourage investors to buy the stock.”
The microblogging company lost more than 55% of stock value over the past year. Twitter shares dropped from its highest level of $53.49 each to its current trading price over the past 52 weeks.
Square and Twitter share similar problems
Square lost more than 30% of stock value since its initial public offering (IPO). The shares of the company traded from its highest level of $14.78 each to its current trading price.
A previous article published on Seeking Alpha noted that Square and Twitter do not only share Dorsey as CEO, but both companies are facing similar problems such their dependence on massive volume businesses. Both companies also need constant innovation to keep up in the highly-competitive markets.
The core of the success and valuation of Twitter is the growth of its monthly active users (MAUs) and the gross payment volume (GPV) for Square.
The article noted that Square has low-margin, high-risk, difficult to profit business model. The market is expected to maintain a discounted valuation on the stock temporarily and eventually will start trading under more scrutiny. The author recommended a Sell rating on the stock based on structure concerns and weak IPO environment.
“The Fly” calculates that Dorsey has destroyed ~$5B in wealth in just the past 11 days.