Twitter stock plummets, takes other social media stocks down with it

A disappointing quarterly earnings report and an end to a six month “corporate lockup” period created a perfect storm of bad financial news for Twitter on Wall Street yesterday, Tuesday, May 6, as the stock plummeted almost 17% in a day amid a flurry of majority stockholders selling off their shares.

Tuesday was the first time that corporate higher-ups at Twitter were allowed to sell their shares, and despite a pledge by Twitter’s CEO, Jack Dorsey, not to sell his holdings, a decline in user growth during Q4 2013 left shareholders in a hurry to sell.

Even at 255 million users, Twitter’s number of active members dwarf in comparison to the other social media giants, and their recent string of disappointing quarterly growth reports have left stockholders with little hope of them catching up to the likes of Facebook and WhatsApp.

Despite the numbers, investors were still optimistic that Twitter’s commitment to mobile growth, and a recent profile “makeover” designed to turn the microblogging site into a more engaging platform, would lure users from other social sites over to Twitter.

But as the quarterly reports showed, the recent changes have had little-to-no effect on Twitter’s growth rate. Leaving many to wonder if the social media giant has reached its pinnacle of users.

And unfortunately, Twitter didn’t implode on its own. The mass exodus of their shareholders created a domino effect among other social media stock owners, who saw Twitter’s decline as a forewarning of things to come with other social mediums.

At day’s end, Facebook stock had fell almost four percent, while the social review site, Yelp, took a 12% nosedive.

While this is Twitter’s largest one day collapse on Wall Street, the stock has gradually dropped by almost 40% since its IPO, and its recent slide is just one of a number of social media stocks that have fallen due to disappointing quarterly earnings results.