Shares in the social media giant Twitter have dropped by 6% after ratings agency Standard & Poor gave the company’s $1.8 billion September debt issue a speculative BB- rating.
The junk rating places the value of the debt at three levels below investment grade.
Last month, the company reported a stark decline in timeline views, used to determine how many users are actively engaged, despite a 23% rise in people signing up to the platform. Twitter is struggling with sluggish growth and has been pushing for new acquisitions, despite saying that its fourth-quarter revenue may fall short of the expected $448.8m.
Overall, the company’s shares have plummeted by 37% this year.
S&P says that the rating could be increased if the company succeeds in maintaining its market share while improving profitability and cash flow, increasing revenue sources and launching new products. However, if it fails to do so, Twitter could be downgraded even further.
“The company is investing very aggressively in growth. Depending on the level of business reinvestment, Twitter may not generate positive discretionary cash flow until 2016,” commented S&P.
A total of US$4.88 trillion of debt has been sold so far this year reports Dealogic, close to the level of 2007 when US$4.91 trillion of bonds were issued over the same period.
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