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Twitter shares dropped 3.7 per cent on Wednesday to US$30.66 at the close in New York. Photo: Reuters

Twitter declines after sales lock on shares ends

Fall renews fears internet stocks are overvalued and sparks selloff in social-media companies

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Twitter shares fell to the lowest level since the company's initial public offering, following the lifting of restrictions on stock sales by insiders and early investors.

The shares dropped 3.7 per cent on Wednesday to US$30.66 at the close in New York, their fourth consecutive decline. Twitter plunged 18 per cent on Tuesday even as early investors Chris Sacca and Rizvi Traverse Management pledged not to sell in a sign of confidence in the San Francisco-based company.

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

Before the lock-up 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 lock-up 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 480 million shares from insiders became eligible for sale on Monday, more than quadrupling the current amount available for trading.

Trading volume was higher on Wednesday than it was on Twitter's market debut. Its value has fallen to US$18.4 billion.

This article appeared in the South China Morning Post print edition as: Twitter slides after sales lock on shares ends
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