Citron was previously bullish on Twitter Inc (TWTR) in the low $20’s.
The stock is up 50% in just two months since our trading call.
What does value investing really mean? Q1 2021 hedge fund letters, conferences and more Some investors might argue value investing means buying stocks trading at a discount to net asset value or book value. This is the sort of value investing Benjamin Graham pioneered in the early 1920s and 1930s. Other investors might argue value Read More
Next! A Lot has Changed!
As previously announced we sold our long position and are now short Twitter (NYSE:TWTR).
Alongside Facebook and Google, Twitter is now being hauled in by Senate Judiciary Chairman Chuck Grassley (R-Iowa) to a hearing on data privacy on April 10.
Wait until the Senate finds out that:
Twitter Will Generate $400 million THIS YEAR, by just selling user data. Not advertising.
How important is Data Licensing to Twitter? The Scary Answer
In 2017, ad revenue declined to $2.11 billion from $2.25 billion in the prior year while data licensing revenue grew to $333 million from $282 million in the prior year.
TWTR CFO Ned Segal on Q4’17 earnings call last month that data licensing is “a really high margin business”. TWTR generated $333 million in data licensing revenue in 2017.
If we assume 100% margin, this segment accounts for almost 80% of total profits.
Twitter makes this money from selling user data even from private messages — and yes a lot of “dick picks”. To see the underbelly of Twitter just watch this undercover investigation done by James O’Keefe and other Project Veritas reporters:
Dynamics Are In Place to Short Twitter
Twitter’s valuation gap with FB and GOOGL has widened to largest spread ever. On 2018 P/E (ex-cash), FB and GOOGL trade @ 16-17x vs. TWTR @ 50x.
Over the last year, insiders have sold/surrendered almost $300 million of stock. The last time there was this much insider selling was in 2015 when the stock was $50 and then preceded to fall to $14 over the next year.
Short interest is at all-time lows at 4.6%
Acquisition by another party is far less likely until these companies clean house with regard to privacy concerns and selling user data.
Article by Citron Research