Twitter’s stock plunged 20.5% by the time the markets closed Friday – the second-biggest loss for Twitter’s stock since the company went public in 2013.
Almost $5bn (£3.8bn) has been wiped off the market value of Twitter after the social media service reported a drop of 1 million users following its action to delete fake and offensive accounts.
Twitter’s shares had fallen by 15% when Wall Street opened on Friday before recovering slightly to be down 16% after investors were spooked by news that the number of active monthly users fell from 336 million to 335 million over the past three months.
The San Francisco-based company warned investors to expect user numbers to fall further as it took greater action to block fake and offensive accounts. The company told investors in its second-quarter earnings announcement that the drop in users reflected “impact from decisions we have made to prioritise the health of the platform”.
“We are confident that this is in the best long-term interest of the platform and will enable long-term growth as we improve the health of the public conversation on Twitter,” the company said.
Twitter said it was committed to cleaning up the site, addressing the issue of “problem behaviours” such as trolling.
“We are proud of the tangible improvements people are seeing on Twitter,” the firm said. “We believe Twitter’s value as a daily utility is enhanced when the conversation on the platform is healthy and people feel safe expressing themselves freely and openly.”
Twitter deleted more than 70m fake or offensive accounts in May and June, and has continued to delete accounts at a rate of 1m a day, according to research by the Washington Post.
The company had come under pressure from the US Congress to take action against bots and Russian-run accounts, which had been used to influence the 2016 presidential election.
Earlier this year Twitter admitted that more than 50,000 Russia-linked accounts used its service to post automated material about the 2016 US election. The company said the posts had reached at least 677,000 Americans.
More than 3,800 accounts had been traced back to Russian state operatives, including an attack on Hillary Clinton’s performance in a presidential debate. Posts by one Russian state propaganda account were retweeted by senior advisers to Trump, including his son Donald Jr.
The company admitted the Russian activity on its platform “represents a challenge to democratic societies everywhere, and we’re committed to continuing to work on this important issue”. Many of the accounts were run from a “troll farm” backed by the Russian government, it said.
The 20% fall in Twitter’s share price is equivalent to $6bn being wiped off its market value, which had stood at over $30bn on Thursday night. The shares recovered slightly to $36.10 at 12.30pm BST (7.30am ET).
The drop in Twitter’s share price comes a day after Facebook’s shares fell 19% when it revealed it had lost 3 million users in Europe since the Cambridge Analytica data breach scandal and the introduction of strict EU privacy laws.
“Have we reached a social media tipping point? Twitter shares tumbled 18% in pre-market trading before paring losses amid a brutal selloff that mirrored Facebook’s nosedive earlier this week,” said Neil Wilson, chief market analyst at Markets.com.
“General Data Protection Regulation (GDPR) seems to have had some impact on Twitter, but the main causes attributed by the company to the decline in users was not moving to paid SMS carriers and ‘prioritising the health of the platform’, which is to do with cutting out fake accounts.
“Everyone knew that Twitter was full of fake accounts – why their removal should be impacting the share price in this way is unclear – investors may be better advised to keep a check on earnings and revenue growth instead.
“Both Facebook and Twitter have been affected badly by fake news, fake accounts and accusations of Russian meddling. But arguably Twitter looks in better shape as the efforts to monetise the platform are working, whilst we see fundamental concerns about Facebook’s advertising model.”