T. Rowe’s Twitter Bullishness Wanes as Firm Dumps 26% of Stake

May 20, 2014 12:01 am ET

May 20 (Bloomberg) -- At least one of Twitter Inc.’s biggest investors lost some confidence in the stock during the first-quarter swoon.

T. Rowe Price Group Inc. dumped a quarter of its Twitter stake in the period, ending March with 13.56 million shares, according to a May 15 regulatory filing. The mutual fund company sold 4.65 million shares in the quarter, more than twice as many as any other investor.

Twitter shares dropped 27 percent in the first quarter and have plunged 50 percent this year as slowing user growth feeds skepticism about the company’s business model. T. Rowe Price’s sales contrast with the bullishness voiced by Twitter’s top shareholders, including co-founders Evan Williams and Jack Dorsey, venture capital firm Benchmark and Rizvi Traverse Management LLC, which all said they were holding their shares.

A wide swath of Twitter insiders were able to sell stock for the first time earlier this month after the expiration of the lockup period that followed the company’s November initial public offering. Chief Financial Officer Mike Gupta was among the sellers, along with Chief Operating Officer Ali Rowghani and Vijaya Gadde, the corporate counsel. Some of the sales were related to tax obligations, according to regulatory filings.

Heather McDonold, a spokeswoman at T. Rowe Price, declined to comment. Jim Prosser, a spokesman at San Francisco-based Twitter, declined to comment.

Even after T. Rowe Price’s sale, which pushed it out of the 10 largest Twitter investors, the Baltimore-based company remains the 12th-biggest stakeholder, with 2.3 percent of outstanding shares, according to data compiled by Bloomberg. Boston-based Fidelity Investments sold 1.77 million shares in the quarter, leaving it with just 378,960, the data show.

Many Funds

T. Rowe Price owns Twitter shares in a variety of funds, with the biggest stake -- 4.61 million shares -- held by the New Horizons Fund, managed by Henry Ellenbogen. That fund didn’t sell any of its shares. The T. Rowe Price Growth Stock fund, managed by Joseph Fath, sold 850,090 shares and now owns 4.55 million, while the Science & Technology Fund, led by Kennard Allen, owns 2.21 million shares after unloading 99,800.

The firm isn’t showing a broader concern about social media. T. Rowe Price added 5.8 million Facebook Inc. shares in the quarter, and owns 2.1 percent of the social network. It also purchased 1.48 million LinkedIn Corp. shares, bringing its control of the Class A shares of the professional-networking service to 7.1 percent.

Twitter said last month that membership rose 25 percent in the first quarter, down from 30 percent growth in the previous period. The deceleration raised concern that the popularity of the microblogging service is peaking just as the company’s advertising business is getting on track.

Still, T. Rowe Price has profited from an early bet on the microblogging service. In 2009, the company joined Institutional Venture Partners, Benchmark and Spark Capital in a $100 million investment that valued Twitter at $1 billion. Twitter’s stock- market capitalization now stands at $19.3 billion.

--With assistance from Christopher Condon in Boston.