Why Brookside Decided to Reduce its Twitter (NYSE:TWTR) Holdings?


Brookside Capital, which is a billion dollar fund manager has decided to reduce its Twitter (NYSE:TWTR) holdings in the latest 3rd quarter. Brookside proudly boasts of its social, economic and political mindset when analyzing potential investments and it is probably the far sightedness of the company which lead to the decision.

The CEO of Twitter, Dick Costolo was recently seen talking at an inaugural analyst day about the concerns that investors like Brookside hold regarding Twitter (NYSE:TWTR).

Brookside decided to lower its shares in Twitter (NYSE:TWTR) from 3.6 million in the 2nd quarter to below 2.4 million in the 3rd quarter of 2014. Costolo’s statement came after Brookside’s decision.

Concerns regarding value of Twitter (NYSE:TWTR):

From day 1, right after its 73% leap from its primary public offering share rate of $26, Twitter (NYSE:TWTR) has been seeing concerns regarding its valuation. However Twitter (NYSE:TWTR)’s share price has managed to retain a good momentum by staying high, even though its stock price dropped more than 37% year-to-date. Concerns regarding the valuation of Twitter (NYSE:TWTR) remain and keeping in mind the price-to-earnings ratio of above 122 and the below average stock performance in 2014, it can be said that Twitter (NYSE:TWTR) is still costly.

In is therefore understandable why long-term investors like Brookside would want to give up its ownership on Twitter (NYSE:TWTR).

As per the valuation, Twitter (NYSE:TWTR) should have had an extraordinary growth rate but that is not the case. The company bagged 13 million new monthly average users in the 3rd quarter of 2014 which increased the total to 284 million, which is a good number but it’s nothing exceptional. Costolo is aware of this fact, which is the reason he talked about Twitter (NYSE:TWTR)’s new plan of an instant timeline as well as reducing hurdles for consumers.

The hurdles that Costolo talked about are evident if we look at the attitude of the 500 million Twitter (NYSE:TWTR) visitors that do not sign in to their account. These people own Twitter (NYSE:TWTR) accounts, but they seldom use it. However, the fact remains that mostly everyone who has access to the internet knows about Twitter (NYSE:TWTR).

Twitter (NYSE:TWTR)’s future plans:

Making this easier for Twitter (NYSE:TWTR) users is not the only thing that the company has planned. Twitter (NYSE:TWTR) us also trying to address the apprehension of its users regarding their Twitter (NYSE:TWTR) accounts. Twitter (NYSE:TWTR) is well aware of the online world and is familiar with the video trend that prevails in the social media sites lately. The videos are also becoming popular because of the mobile population and Costolo plans to include videos into the Twitter (NYSE:TWTR) experience in order to keep the users involved.

The changes that Costolo has planned need to be implemented as soon as possible for investors to see Twitters (NYSE:TWTR) potential. As of now, investors like Brookside will remain onboard Twitter (NYSE:TWTR) with reduced share holdings which would lead the company to still enjoy some of Twitter (NYSE:TWTR)’s momentum without any potential risk for the investor.