By Andrew Keshner
Twitter cut into Donald Trump’s megaphone by permanently suspending the president’s account Friday to avoid the “risk of further incitement of violence” after pro-Trump supporters stormed the U.S. Capitol on Wednesday.
But how much was the Commander-in-Chief’s presence worth to the platform after racking up 57,000 tweets and approximately 89 million followers.
Twitter (NYS:TWTR) announced Trump’s permanent suspension this month and it fell 6% before trading started Monday morning, the first full trading day after the ban took effect. That blotted out approximately $2.5 billion in market value.
That tallies with one analyst estimated from 2017, which said that Trump generated an estimated $2 billion for the site by bringing in users, keeping them on the site to read what he had to say — and scrolling across ads in the process.
By mid-day, shares were trimming losses, down almost 7% after bouncing off a low of approximately 11%. Twitter shares closed Monday over 6% off.
The company’s market cap closed Monday at $38.319 billion, down from $40.944 billion at Friday’s close, according to FactSet data. That’s a $2.625 billion drop.
For Mark Shmulik, internet analyst for AllianceBernstein, Twitter’s lower stock market opening Monday “certainly feels like a bit of overreaction.” He added, “Most advertisers won’t touch anything Trump related.”
And that was even before the violence at the U.S. Capitol, he said. On Sunday, PGA of America cut its ties with the Trump Organization, saying it wouldn’t hold the 2022 PGA Championship at Trump’s Bedminster, N.J. golf course.
In Twitter’s 2020 third quarter , its revenue was $936.2 million, up from $823.7 million in the same quarter one year earlier. A Twitter spokeswoman declined to comment.
In fact, Trump’s absence might be Twitter’s long-term gain, Shmulik and other market observers said.
Without Twitter conversations constantly occupied by Trump’s tweets or reactions to his tweets, Shmulik said, more advertisers could increasingly look at the site as safe for their brand, which may bump up ad prices.
“Assuming that’s the case, there’s an argument over long term, this is a net positive to the company,” he said.
Facebook on Thursday banned Trump at least until the end of his term. Facebook (NAS:FB) shares closed down roughly 4% on the day Monday.
The downward pressure on Twitter shares could be happening because the market could be anticipating too much of an exodus from the site, according to Shmulik.
Other market observers questioned just how many Twitter users come and go based on Trump’s presence. “We have always wondered how much of Twitter’s growth came from the ‘Trump Bump,’” MoffettNathanson analyst Michael Nathanson wrote in an investor note .
Twitter stock will ultimately rebound — just like its user base will if there’s any sort of consumer decampment from the site, according to Sandra Matz, a professor at Columbia Business School studying consumer behavior and technology companies.
There may well be consumers on the right who leave altogether, but Twitter may pick up consumers on the left who endorse the company’s ban, she said.
There’s also the gap between people’s intentions and their actions to account for.
Though some right-leaning Twitter users may be furious with the platform now, if typical consumer behavior applies, Matz said, that anger will fade for many and revert back to the formed habit of checking out what’s been said in the site. “You have this strong emotion reaction,” said Matz. “As long as your strong emotional reaction conflicts with convenience, most people don’t take action.”
So what comes next for Twitter and other tech companies? More regulation on content and liability under President-Elect Joe Biden, and a Democratic-controlled House of Representatives and U.S. Senate?
Shares in Twitter are down 11% year-to-date in the first trading days of 2021. The Dow Jones Industrial Average (DOW:DJIA) and the S&P 500 (S&P:SPX) are each up more than 1%.