Leak of revenue figures adds to Twitter's bad day; shares fall 18%

NYSE halts Twitter trading early amid automatic computer-generated sell orders

NEW YORK — Shares of Twitter Inc. went haywire Tuesday when a data-scraping financial website leaked the social media giant's downbeat revenue figures with a tweet nearly an hour ahead of the scheduled quarterly earnings release.

As the San Francisco company's stock fell more than 17%, the New York Stock Exchange halted trading at 3:27 p.m. Eastern time, about 20 minutes after the first tweet.

Twitter officials were able to release earnings early. By the time trading resumed for the last 13 minutes of the day, a crush of mostly automatic computer-generated sell orders flooded the market. That's when a single financial functionary, called a specialist, stepped in to match buy and sell orders in orderly fashion, preventing an automated free fall.

"That's the advantage of having a person," said Christopher Schwarz, a finance professor at UC Irvine. "If you have a huge imbalance between buyers and sellers, a computer algorithm is not necessarily going to know what to do."

Selerity Inc., a New York firm that searches the Web for unreported financial news it can provide to clients, discovered the Twitter quarterly results that were hidden from normal searches. It began releasing the information in a series of tweets.

The stock closed at $42.27, down $9.39, or 18.2%.

Underlying the wild end to the trading day were Twitter's poor first-quarter results and weaker outlook.

The company lost $162.4 million, compared with a loss of $132.4 million in the year-earlier quarter. Revenue jumped to $435.9 million from $250.5 million, but still fell far short of analysts' expectations of $463 million.

"The numbers were clearly weak," said analyst Brian Wieser at Pivotal Research Group.

Twitter Chief Executive Dick Costolo said in a conference call with financial analysts that he was "disappointed."

The company heaped blame on a "lower-than-expected contribution" from advertising revenue, specifically the kind designed to urge a user to take an immediate action. So fewer companies advertised via Twitter than Twitter had hoped, cutting into revenue growth.

Amid the disappointment, Twitter is turning to Google Inc. for help.

Twitter said it had signed up with Google's DoubleClick ad serving platform to measure and track ad performance better and to make Twitter ads available through DoubleClick's automated ad auction system. Twitter also announced the acquisition of direct response ad company TellApart.

Boosting ad sales will take time, company executives said, and they lowered financial expectations for the rest of the year. As Twitter Chief Financial Officer Anthony Noto phrased it, "We still have a great deal of iterating and fine-tuning to do."

The reasons for Twitter's ad revenue letdown are many, but slowing user growth is a big one, as newcomers scratch their heads trying to figure Twitter out while too many experienced users quit. Twitter calls the latter a problem of "retention."

The company has spent the last year adding features and redesigning old ones to keep users loyal and active, Costolo said. They are being designed to answer two fundamental questions, he said: "Why should I use Twitter? And how do I use Twitter?"

A key new feature, Instant Timeline, populates a user's screen with tweets that Twitter's software programs predict will be especially compelling to particular users. For years, tweets were listed only in chronological order. Twitter aims to "reduce the time and work necessary to get a great experience on Twitter," he said.

Costolo sought to assure investors that Twitter's future is bright.

"We couldn't be happier about the growth opportunities we have in front of us," he said.

dean.starkman@latimes.com

russ.mitchell@latimes.com

Starkman reported from New York; Mitchell from San Francisco.

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