Is This Good for Twitter Stock (TWTR)?
Twitter Inc (NYSE:TWTR) has been quietly selling off its suite of developer products to Alphabet Inc (NASDAQ:GOOG), which has me wondering: Could Alphabet want to buy the entirety of Twitter stock (TWTR stock)?
It’s not as crazy as it sounds.
Twitter is the prodigal son of social media. It made poor life decisions, got in with the wrong crowd, and went down a bad path. No one who looks at the mass exodus of senior staffers and the write-downs can say they are surprised by Twitter’s abysmal performance on the market.
Of course Twitter stock is down 60% from its IPO price. Of course there is no comparing it to Facebook Inc (NASADQ:FB). There has been nothing but bad news for TWTR stock since the moment it sought listing on the New York Stock Exchange (NYSE). But…
…that only makes it a more attractive buy for Google. Think about it.
If Twitter stock has been hammered over the last 24 months, and it most certainly has, wouldn’t that mean it is trading at a discount? Google would be able to scoop up this firm at a fraction of its intrinsic value, but it would mean offering shareholders a juicy bonus for their troubles.
Otherwise, I’m not sure the offer would make it past the shareholder vote. To be clear, this is just a hypothetical scenario. Google hasn’t officially tried to buy Twitter…yet.
It has simply absorbed Twitter’s suite of developer products, a service called “Fabric” that includes popular tools like “Crashlytics,” into its own developer team. We don’t even know how much Google paid for these assets, much less if it will make a move on Twitter stock. (Source: “Google has acquired most of Twitter’s developer products, including Fabric and Crashlytics,” Re/Code, January 18, 2017.)
All we know is that a bunch of Twitter’s coders are going to work at Google,and that a lot of Twitter’s tech is being moved into Google’s back-end. But let’s try thinking outside the box.
Why would Google want to own Twitter? Are there any good reasons?
As it turns out, there are a lot of reasons why Google would want to gobble up TWTR stock. For one thing, it can’t just rely on search-related revenues forever. Digital advertisers are starting to pay more attention to Facebook because of its social-driven aspect.
Google doesn’t have anything like that to offer advertisers. Its haphazard attempt to build a social media app ended in spectacular failure. Remember “Google+”? What a waste of time and resources. If buying Twitter helps erase the memory of that flaming pile of garbage, I urge them to do it.
But more to the point, Twitter would give Google access to more than 300 million social media users, many of whom are passionate users. There may not be that much room for subscriber growth, but that was only a bad thing when Twitter was a standalone company.
It was expected to grow and convert eyeballs into dollars. Those were its obligations as an independent firm, but things would change dramatically if it became part of Google. Twitter would stand alongside Google’s slew of popular features; such as “Gmail,” “Translate,” and “Search.”
It would feed its data and users into the larger Google ecosystem. Just thinking about it makes me giddy, because it is a win-win scenario for both companies. As for what this means for TWTR stock, I should think the answer is simple.
Twitter stock is at least comparable in fundamental strength to LinkedIn Corp (NYSE:LNKD), and that company sold for $26.0 billion to Microsoft Corporation (NASDAQ:MSFT).
This would suggest that Google would have to offer somewhere between $30.00 and $35.00 to gain shareholder approval. Since the current price of TWTR stockis closer to $17.00, the upside on this trade could be pretty big.
In summary: Google is buying Twitter’s developer tools and I wouldn’t be surprised if it eventually bought out the entire company.