Should Twitter Delist Its Stock?

It’s no secret that Twitter (TWTR) has become a colossal failure. It’s hard not to look back on the days when its shares were cresting $70 a share and say, “What were we thinking?” Who knows what potential investors saw in the social media platform, but it sadly never came to fruition.

The company’s stock took another huge hit on Tuesday when the site experienced global outages for about ten hours. And while Facebook saw a few outages over the last few months, it seems as if Twitter’s was the straw that broke the camel’s back for investors. Shares dropped 7% for the day and are down another 4% in pre-market trading on Wednesday, as of this writing, to an all-time low of $16.02.

Shareholder anger has gotten to the point where some investors have suggested that the company delist its stock from the New York Stock Exchange and go private again. For Twitter’s purposes, let’s discuss why they should and shouldn’t consider it.

Why it should

Twitter is by no means in danger of having its stock delisted involuntarily. But the main reason why it should consider doing it voluntarily is so that it can really focus on its product. The shareholder obsession over the last few years has been user growth. And since Twitter can’t seem to deliver, it’s putting more and more focus into trying to figure out its user growth problem rather than improving its platform and revenue.

Companies succeed when they put drivers before solutions, but Twitter has been so focused on solving the user growth problem that it’s ignored the fundamental things that drive it. Delisting would remove the pressure from shareholders and let the company focus on what it wants to focus on.

Why it shouldn’t

When a stock is delisted, the transition isn’t seamless. The equity market is a way for a company to raise capital for future investments. Also, delisting can have a negative effect with debt financing, potentially triggering a downgraded credit rating, and thus increasing interest expenses.

If Twitter wants to really focus on improving its product, it needs capital to do that. By going private, especially in the state it’s currently in, it could severely hamper its ability to get the funding needed to do that.

Another reason why Twitter shouldn’t consider delisting is because it would be difficult to get listed again if things looked brighter in the future. Twitter has always had big plans for itself and delisting now would be killing those aspirations.

Conclusion

Twitter’s in hot water right now and it’s difficult to say if or when the company will rebound. But while delisting its stock from the New York Stock Exchange may give it some breathing room to focus on the drivers rather than the solutions, the risk of doing so is simply too high to merit serious consideration.

That said, it’s hard to blame investors who don’t believe in the stock anymore. The company’s new CEO, Jack Dorsey, has his work cut out for him if he wants to save this company and make it a company worth investing in for 2016, and the years ahead.