With Twitter Inc (NYSE:TWTR) debt being rated as rubbish, Brian Sullivan of CNBC asks why the social media giant even has debt.
The comment from Sullivan about Twitter Inc (NYSE:TWTR) came after he and co-host Amanda Drury were discussing a report by Dominic Chu that Standard & Poor’s has given a “BB-“ corporate credit rating for the company.
“My question for Twitter is why do you have debt in the first place? You’re an asset-light corporation. You’re not building a factory. You’re not buying another company theoretically yet. And you have equity for that. I don’t know why they even have debt,” Sullivan said.
Drury mentioned that even Herb Greenberg, their colleague at CNBC who loves Twitter Inc (NYSE:TWTR), has serious doubts about the company as a business.
Sullivan added that 44% of the people on Twitter Inc (NYSE:TWTR), one of the world’s frequently visited sites, actually do not do anything on the social network. He said that it is only natural for him and his colleagues in the media to love Twitter because the nature of their work is self-promotional.
Meanwhile, as a result of the “Junk” rating on its credit, Twitter experienced a 5% drop in its share price on Thursday. It lost most of its 7% gains on Wednesday.
Nonetheless, it’s not all bad news for Twitter.
“The unsolicited ‘BB-‘ corporate credit rating incorporates our assumption of healthy growth in monthly active users and revenues, the possibility of positive discretionary cash flow in 2016, and ongoing minimal debt leverage,” S&P analyst Andy Liu said in the firm’s rating.
Twitter Inc (NYSE:TWTR) shareholders includes John Thaler’s Jat Capital Management which reported owning about 7.33 million shares in the company by the end of the first half of the year.