Twitter’s Stock Is Getting a Lot of Volume and Love This Week; Here’s Why
Where is all this interest in Twitter Inc (NYSE:TWTR) coming from? Indeed, there has been a huge spike in volume for Twitter stock after Microsoft paid the really big bucks for LinkedIn. Microsoft’s big move into the social media sphere has changed the sector’s landscape. Microsoft’s rivals cannot allow LinkedIn to gain too much ground, but they need the tools to survive the weight of that competition. This means Microsoft’s competitors will be targeting another social media company with global reach and users in the dozens of millions. This is what makes Twitter such an ideal acquisition target—even at a premium price.
The race for Twitter stock has started and the key to winning will be speed. Whoever buys Twitter stock cannot waste time.
When Microsoft bought LinkedIn Corp (NYSE:LNKD), it was its largest acquisition to date. The company paid the largest sum ever for a social network. It’s no surprise that investors have found that Twitter might be the next big thing. Twitter stock, after slumping along for weeks, has soared nearly 10% between Monday and Tuesday. The head of equity at Saxo Bank, Peter Garnry, is betting that Alphabet Inc (NASDAQ:GOOG), better known as Google, will acquire Twitter before the end of 2016. (Source: “Google buying Twitter predicted to follow Microsoft’s move for LinkedIn,” MarketWatch, June 14, 2016.)
The good news is that Twitter stock is still down nearly 75% from its 2013 peak, which leaves plenty of upside. The fact that Microsoft paid such a premium for LinkedIn is a bullish sign. Twitter is based on a very different model compared to LinkedIn. But its business has shown that user numbers are one of its keys to success. Twitter is also the last of the social networks—the kind that has changed culture itself—to remain independent of Facebook Inc (NASDAQ:FB). This has the effect of making Twitter more valuable. Just as any desirable asset appreciates with rarity, so does Twitter.
But even gold has its grades and karats. As attractive as Twitter might be, it recently lost out to “Snapchat” in the rate at which it builds its userbase. That might be the one thing that could make Twitter a less attractive buy than LinkedIn.
Twitter has many regular users. Celebrities and politicians love it as a communication tool. The reason why Google might buy it is to help it compete against Facebook. By buying Twitter, Google can instantly acquire access to Twitter’s 300 million users and enhance its social media position after failing to make any dents against Facebook with “Google Plus.” (Source: “Google buying Twitter predicted to follow Microsoft’s move for LinkedIn,” MarketWatch, June 14, 2016.)
But why limit the choices to Google? Indeed, even if someone comes up with a good reason why Google should not buy Twitter, it still leaves the latter stock in play for an acquisition. The LinkedIn acquisition has “done more to boost Twitter’s value than CEO Jack Dorsey has. (Source: “Does the LinkedIn sale put Twitter in play? Yes, it does,” Recode, June 13, 2016.)
As for Twitter’s investors, the fact that the stock has moved upward and in such a dramatic way has sent a clear signal: Twitter shareholders would rather see another company owning it—a company that will save Twitter. Google has the best reasons to acquire it.
What is certain is that Twitter stock will not be the same again. The compass is pointing to an acquisition. The fact that the spellcheck function in Microsoft’s “Word” allows me to write “tweeting” without indicating an error is proof that Twitter has conquered a major role in the cultural landscape. Twitter is not going away; it will either grow or some company may buy it. The Microsoft-LinkedIn deal suggests the latter will promptly happen.