Twitter Tagged At 'Junk' Status By Standard & Poor's

Twitter Inc TWTR shares fell more than 5 percent Thursday after a major ratings agency tagged its debt at junk status.

Twitter traded recently at $40.32, down 5.2 percent.

Standard & Poor's said its rating indicates "major ongoing uncertainties" regarding potentially "adverse business, financial and economic conditions" facing the social media company.

The unit of McGraw-Hill Financial assigned unsolicited "BB-" ratings with a "stable outlook" to both the company and the $1.8 billion in debt issues by Twitter in September.

Standard & Poor's said investors in the recent debt issue could expect recovery of 50 percent to 70 percent of principal in the event of a default.

Standard & Poor's credit analyst Andrew Liu said Twitter may not generate positive discretionary cash flow until 2016.

Twitter will "continue to experience very strong growth and not encounter a significant increase in competitive pressure," Liu said.

Liu expects the company will also maintain "meaningful cash balances" to offset negative cash flow and volatility.

As of September 30, the company had about $3.6 billion in cash and cash equivalents and short-term investments, including proceeds from the recent debt offering.