Jack Dorsey, Twitter’s co founder, chairman and interim CEO bought $875,000 of the company’s shares last Friday, in his first trade since the company listed. He is buying alongside a number of other company insiders this month, as shown on the chart of Twitter’s stock price below.
What is interesting is that the total dollar amount committed to buying Twitter shares of late pales alongside the amount raised by the one seller, Evan Williams, a former President, CEO and CFO of the company, who has unloaded multiple millions of dollars worth of stock.
In OTAS we differentiate between routine sales by insiders who understandably want to dispose of stock accumulated prior to the listing, and trades afforded high importance that have a directional bias. Williams has made only one high priority disposal, which was back in May, but it is sufficient to mark him out as the most successful insider trader of Twitter shares.
Dorsey may grab the headlines, but to date Williams takes the plaudits as the better trader of Twitter shares. Time will tell whether Dorsey and his colleagues have made a profitable investment, but the size of their purchases might indicate a lack of complete conviction. EPS Momentum is firmly negative for the shares, although the stock price has fallen well below the trend of forward earnings estimates, as investors raise serious questions about whether the growth rate that Twitter can deliver justifies the valuation attached to the group.
At 30x EV/EBITDA Twitter is at the lowest value since its listing, both in absolute terms and relative to peers and the market, but still has the highest absolute valuation of all but Linkedin. With no yield and precious little free cash flow yield to support the shares and an EV/Sales ratio that would make all but Facebook blush, Dorsey and his fellow insiders have their work cut out to convince investors that the timing of their recent modest share purchases was well informed.
Check out OTAS for more detail on everything discussed in this blog, including a full listing of insider traders at Twitter and a ranking of directors by success or failure of their trades.