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Twitter Drops 6% on Hacking Scandal

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Heavy Selling Following Scandal

Following a 1.5% rally yesterday, Twitter stock prices are down over 6% pre-market on Thursday. Traders are digesting the news of a recent hacking scandal that has shaken confidence in the tech firm.

It was reported yesterday that accounts of leading figures and businesses had been hacked. Accounts hacked included Barack Obama, Joe Biden, Elon Musk, Bill Gates, Kanye West, Michael Bloomberg, and Apple.

As part of the hacking, illicit users were promoting a bitcoin scam. The scam illegally procured over $120k in funds to a digital wallet which was listed in the tweets.

In light of the incident, Twitter announced that it was blocking new tweets from all verified users in a bid to limit the damage caused by the disruption.

Twitter’s Internal Systems Compromised

In a tweet issued from Twitter Support, Twitter said:

“We have locked accounts that were compromised and will restore access to the original account owner only when we are certain we can do so securely”.

Twitter further issued a release on Wednesday evening. They disclosed that during the incident its own employee tools were also compromised. They said:

“We detected what we believe to be a coordinated social engineering attack by people who successfully targeted some of our employees with access to internal systems and tools… We know they used this access to take control of many highly-visible (including verified) accounts and Tweet on their behalf”.

Negative Q2 Earnings Forecasted

Ahead of the news, Twitter shares had been trading higher. Shares were supported by the broad improvement in risk sentiment over recent weeks. Traders have seemingly looked beyond rising second-wave fears and instead focused on the continued economic improvement in the US, as highlighted by increasingly positive data.

Twitter has recently been in the spotlight regarding some controversy around its decision to censor some of President Trump’s tweets which provoked a mixed reaction. This latest incident represents a far greater threat to Twitter’s reputation. There are fears that high-level users could migrate away from the social media platform. This would be highly damaging and likely lead to a deeper sell-off in Twitter stock.

Twitter Holding Above Broken Bearish Trend Line

twitter shares

Twitter is due to report Q2 earnings on Thursday, July 23rd with expectations of a -0.006 EPS. In Q1 the company reported an EPS of -0.01 underwhelming expectations of 0.10. This highlights the severity of the decline suffered in Twitter stock as a result of the broad sell-off in equities seen amidst the COVID-19 outbreak.

Following the failure at 36.86, Twitter has since retested the broken bearish trend line from 2020 highs which is so far holding as support. While the 33.54 level holds as support, focus remains on further upside with the 39.47 the next upside level to monitor.

To the downside, should the 33.54 level break, 30.93 is the next key support to note.

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