Twitter Inc (NASDAQ: TWTR)
Over the past six months, rumors of a Twitter takeover have gathered pace. Some are now describing Twitter as ‘beleaguered’, with its stock languishing as it struggles to attract new users.
Reports from CNBC are now suggesting that a takeover of TWTR is close, with several high profile tech companies showing an interest. Two of the named suitors so far are Google (and their parent company Alphabet) and Salesforce.com. However, neither of these companies have commented publicly on their interest.
The Current State Of TWTR
Since its IPO, Twitter’s stock value has plummeted. However, the resurgence of these fresh rumors has caused its stock to rebound by around 21 percent. Of course, its current level of around $22.60 is nowhere near the level it was when it was first floated, when it reached nearly $75.
It has certainly been no secret that TWTR has made a concerted effort to revitalize its fortunes. Twitter’s founder, Jack Dorsey, recently returned to the ailing company, and several strategies have been suggested to try and bolster the number of users on the platform and monetize the company. For example, as well as recent deals with the NFL, Twitter has recently launched its Moments feature and has looked into ways of extending the character limits in tweets while still sticking closely to the brand’s core principles.
However, the impact of these tweaks so far has been limited. TWTR’s user base continues to stagnate, and it’s struggling to monetize the offering for businesses. Due to its failure to attract revenue, cash flow is problematic and private equity investment doesn’t seem to be forthcoming.
Who Will Invest In Twitter?
So, with this in mind, who would consider investing in TWTR, and what would the draw be for them?
As mentioned earlier, Salesforce and Google appear to be the two main candidates interested in acquiring Twitter.
For Alphabet or Google, the acquisition of Twitter would make strategic sense, even if they would ultimately be paying for a struggling company. Google+ was never the social savior that Google hoped it would be, and Google appears to have given up on its efforts to make it a force in the social markets. The acquisition of Twitter would allow Google to fill that void, especially as it would also acquire Twitter’s real-time search capabilities.
Of course, there are also benefits to Twitter being acquired by Google. TWTR has always been a small company in comparison to its rivals, such as Facebook, and an acquisition by a company the size of Google would improve its financial power. Not only that, it would vastly improve Twitter’s in-house expertise, allowing it to conduct fixes away from the public eye. By being absorbed by a larger corporation, it will also end any potential unfavorable comparisons with Facebook.
An acquisition by Salesforce would come with different advantages, but many of these appear less clear-cut than with an acquisition by Google. Much of this stems from a lack of clarity in Twitter’s mission statements. In the past, those considering the acquisition of Twitter have been cautious. This is because they’re unsure of where Twitter sees itself going.
Historically, TWTR has been a source for immediate news and reaction. But how it expands from here is unclear, especially as it must find a way that prevents it from becoming Facebook 2.0.
For these reasons, many believe that the rumors of a TWTR sale are just that – rumors. A Twitter sale remains far from imminent, and some believe that it will never be sold, as it represents too much of a risk for investors who would be buying a platform that has seen next to no growth in the last couple of years. However, as we know, you can never say never in the tech world. After all, as Microsoft’s recent acquisition of LinkedIn shows, social networks are big business. For Google, it could be the next big step and a great way of putting the failed Google+ experiment behind them, but only time will tell.
How Would The Markets React To A Sale?
The markets have reacted warmly to a potential Twitter sale, with the tech company’s stock rising as rumors gained traction. On Monday, Twitter’s stock climbed by 4% as rumors surfaced that Google had recruited investment bank Lazard in order to seal the deal.
The bank specializes in mergers and acquisitions and have further fueled speculation that a sale is afoot. Overall, the TWTR stock rose by 1.9 percent last week, and there was a further spike of 21 percent on the 23rd of September.
This appears to show that the markets would react warmly to a sale, and potential investors should be wary of the possibilities of a sale. It should be of particular interest to those who invest in tech firms or those who spread bet on the price of stocks and shares. This is because it looks like we may see high levels of fluctuation in stock prices during and shortly after the takeover, providing investor opportunities.
A sale may be far away at the moment, but the rumors are beginning to gather pace. Watch this space closely for the latest developments.
[Image Courtesy of Pixabay]