This Could Be a Big Deal for TWTR Stock
Twitter Inc’s (NYSE:TWTR) next deal could create overnight millionaires. But owners of TWTR stock need to understand this has nothing to do with social media.
Twitter shares popped on Monday on rumors private equity investors may be looking to scoop up the social media company on the cheap. According to a report published in Bloomberg, Marc Andreessen and private equity fund Silver Lake might be interested in investing in the firm. (Source: “Twitter Jumps on Report of Possible Silver Lake Deal,” Bloomberg, February 1, 2016.)
There’s no questioning the fact that Twitter has been struggling. But the fact that Jack Dorsey has managed to get two heavyweights interested in the company at this point bears a positive signal on its future.
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A private investment in a public entity, PIPE for short, will be a great way to finance Twitter without resorting to the two less viable financing options. Going for another round of share offering will further dilute stockholders’ shares. Likewise, debt financing will not be feasible until the company is making enough money to service it.
Venture capitalist Marc Andreessen begs no introduction. He has funded many technology companies including, Twitter’s rival Facebook. But there’s something peculiar about the other party that suggests another option might be in the cards.
Silver Lake funded the biggest tech merger of 2015 between Dell and EMC. It is the same private equity firm that took Dell private back in 2013.
Could it be that Dorsey is considering taking Twitter down the same lane?
If you rewind back a week, four key executives departed from Twitter. All of them said the move was voluntary. Is it likely they know something we don’t?
No official source has confirmed the rumor yet, but we have also not received a denial. Even if this deal falls through, Twitter’s revamped platform could attract more interested parties.
Yes, Twitter is undergoing a massive overhaul, which hints at a turnaround in Twitter stock. The company has undergone a big reshuffling in its c-suite last week. The company’s management looks more streamlined now. Meanwhile, the company has hired a new chief marketing officer.
A weak marketing strategy has been one of the reasons why the company hasn’t been able to achieve traction with the average social media user. The new marketing executive could help change that. Leslie Berland comes with a solid experience in marketing from American Express.
Meanwhile, some promising new features have been added to Twitter’s platform recently. Worth a mention are “Promoted Moments,” “Conversational Ads,” and the integration of video advertising. These are going to bring more ad dollars for the company in the coming quarters.
Twitter is often wrongfully compared to Facebook. But let’s be fair, Twitter caters to the more serious, news-hungry audience. Like LinkedIn, Twitter serves a niche.
But compared to the former, which has only 100 million users and bigger losses, Twitter has a bigger userbase. The platform has also lately been better monetized. It makes more sense for Twitter to trade at levels comparable with LinkedIn stock.
Meanwhile, Jack Dorsey’s efforts to turnaround Twitter will likely bear fruit this year. In fact, they might already be attracting private investors. If shares of TWTR stock stay this low, I wouldn’t be surprised to see the company get bought out.
That would mean a tidy payday for shareholders.