Twitter hits record low after lifting of investor restrictions on share sales

Twitter fell further after hitting a record low yesterday following the lifting of restrictions on share sales by insiders and early investors.

The stock dropped as much as 6% and traded at $30.83 in New York. Twitter plunged 18% yesterday even as early investors Chris Sacca and Rizvi Traverse Management pledged not to sell in a sign of confidence in the company.

The decline has renewed concerns that internet stocks are overvalued and sparked a sell-off in social media companies.

Before the lockup expired, Twitter’s shares had slipped this year after the company reported slowing user growth, raising concern that it may not be able to add more members. Still, Twitter trades at a level that makes it more expensive than Facebook or LinkedIn, based on projected 2014 sales.

“The lockup is the straw that broke the camel’s back,” said Daniel Ernst, an analyst at Hudson Square Research in New York. “If Twitter’s growth was still good, if the company didn’t have such a high valuation, if its margins were better, we wouldn’t have today’s stock situation.”

About 480m shares from insiders became eligible for sale on May 5, more than quadrupling the amount available for trading.

Twitter’s decline yesterday was the biggest drop compared with lockup expirations from Facebook, LinkedIn, Groupon, Pandora Media and Google since 2004, according to data from Bespoke Investment Group. Among internet stocks, Yelp slid 13%, the most since November 2012, while Pandora lost 8.9% yesterday, the same day that China’s biggest e-commerce company Alibaba Group Holding filed for an IPO in the US.

Trading volume was higher yesterday than it was on Twitter’s market debut. The decline has dropped the company’s value to $18.4bn. That compares with the $19bn Facebook agreed to pay for WhatsApp, a messaging application, in February.