Twitter (NYSE:TWTR) Debt Fails to Impress S&P
Quite recently, in light of Twitter (NYSE:TWTR)’s debts, acquired due to unwise spending, Standard & Poor have rendered it ‘junk’. The aggressive spending trends have made Twitter (NYSE:TWTR) the target to the U.S. rating agency. Twitter (NYSE:TWTR)’s decision of going ahead with acquisition even when the profit margins are not exceeding to satisfactory levels.
According to this harsh ratings of the micro-blogging website, the debts awarded in September were nearly $1.8 billion. Furthermore, the decision to sell IOUs to investors for interest in exchange can humorlessly, be awarded a BB-, which is under three points below the normal investment grading that Twitter (NYSE:TWTR) enjoys.
During the current market scenario, when growth rate in terms of revenue is quite stagnant for Twitter (NYSE:TWTR), it doesn’t seem a likely idea to lend capital in debts. Additionally, the S&P notes that the company is investing quite aggressively on growth. The rating agency further states that in light of such exceeding level of reinvestment, Twitter (NYSE:TWTR) might not be able to generate flexible capital flow until year 2016.
According to recent news, Twitter (NYSE:TWTR) has announced that it plans to set up its offices in Hong Kong in the hopes of establishing and furthering its advertising and global approach. This will add up one more location to the blog site’s portfolio, which is currently restricted to China. According to the Q3 figures, there has been a 7% fall in the timeline views on per user basis. When looking at the 23% rise in Twitter (NYSE:TWTR) usage, one might disregard the dip in timeline views, however the user view of the timeline is a noteworthy figure to keep a check on site engagement. In addition, Twitter (NYSE:TWTR) sites that the revenue for Q4 are likely to be well below the expected $448.8 million target figure.
In order to better its rating, assigned by S&P, if Twitter (NYSE:TWTR) is able to invest in useful projects, engage and draw its revenue from varied sources, brings new products to the market, and succeeds in keeping its market share. Furthermore, the company will need to improve its profit figures and generate steady cash flow. However, there is no guarantee that the ratings for the micro-blogger will improve. This will, however, work in the company’s favor, in terms of better generated profits and revenue.
The investor’s trust has been dampened a little by the recent speculations about Twitter (NYSE:TWTR). The top executives came together to address these issues, to discuss future prospects for a potential growth.
It was revealed at this event that Twitter (NYSE:TWTR) is experimenting with new features, such as video sharing and storing feeds that are relevant. This will bring Twitter (NYSE:TWTR) head to head with Facebook (NASDAQ:FB); its traditional rival.
These revelations are bound to strengthen investor trust in the company. The shares dropped by 6% as a result of ratings, and went up 7% on Wednesday after company’s plans of working on new mobile devices were revealed. The sum of losses this year so far is 37%.