Twitter Inc: Is Twitter Already on Sale?

Twitter IncThe First Official Rumors of a Twitter Sale

It seems that, as far as the markets are concerned, Twitter Inc (NYSE:TWTR) is already on sale. In fact, Twitter stock has experienced a bullish trend in the past few weeks. But, while the logic was there—implying that a takeover would serve up the best possible outcome for Twitter’s shareholders—there were only rumors. Nobody at Twitter or any of the potential buyer candidates issued a sound, a “tweet,” a “Facebook” post, or a “Snapchat” about selling or buying Twitter.

Cue the “Also sprach Zarathustra” overture by Richard Strauss (made famous by the movie 2001: A Space Odyssey). Twitter’s co-founder Evan Williams has made it official. (Source: “Twitter co-founder says company must consider sale,” New York Post, August 31, 2016.)

So the question now is not whether Twitter stock is up for bids—the answer to that is now known—but who will get their hands on one of the biggest prizes in the social media space?

Any list of companies that might want to buy Twitter would necessarily have to include some of the usual suspects. At Profit Confidential, we’ve often mentioned the possibility of Google (Alphabet Inc) (NASDAQ:GOOG) taking over Twitter, as early as last July. See “Twitter Inc: This Could Send Twitter Stock Skyrocketing.” Certainly, the idea of someone taking over TWTR stock has been floating around ever since Microsoft Corporation (NASDAQ:MSFT) decided to capture LinkedIn Corp (NYSE:LNKD).


Co-Founder Opens the Gates to a Twitter Takeover

The Verizon Communications Inc. (NYSE:VZ)/Yahoo! Inc. (NASDAQ:YHOO) deal, on the heels of the LinkedIn deal, only served to highlight the possibility of another takeover. Last week, when Bloomberg’s Emily Chang asked Williams if Twitter would remain independent, Williams replied: “We’re in a strong position right now, I think, and, as a board member, we have to consider the right options.” (Source: “Evan Williams isn’t shutting the door on Twitter acquisition,” Vator, August 31, 2016.)

Translation: Twitter will not shut the door to those who knock with a suitable deal. The term “suitable,” like so many adjectives, is a relative one. Twitter has some power to determine who might acquire the company, but it can’t be overly choosy. The market thinks that TWTR stock is suffering. Doubtless, its year-to-date performance has not enthused shareholders with its over-13% loss, even if it has recovered 28% in the past three months.

But the fact is that Twitter has failed to meet its growth targets; in other words, it has not added new users as quickly as analysts expected. Twitter has tried various solutions, some of which have been rather interesting, including the deals with various sports franchises such as the National Football League (NFL) to broadcast games in livestreaming.

Nothing Has Moved TWTR Stock Better Than Rumors of a Takeover

TWTR stock gained seven percent since last week, following Williams’s comments. At the beginning of last August, Twitter shares exceeded $20.00 (gaining some 27%) after rumors of a Microsoft deal. But after the rumors fizzled out, Twitter shares came down again.

The difference now is that Twitter has spilled the beans, officially testing how TWTR shareholders would respond to a takeover. In my opinion, the leading candidate for a takeover of Twitter is Alphabet Inc. There is an ever-thinner line separating media and tech companies, and a Google/Twitter merger makes considerable sense. A complete list of possible buyers would have to include Apple Inc. (NASDAQ:AAPL), Facebook Inc (NASDAQ:FB), News Corp (NASDAQ:NWS), Verizon, AT&T Inc. (NYSE:T), Microsoft, and Inc. (NASDAQ:AMZN). But Google makes the most sense. (Source: “So, does anybody want Twitter?TechCrunch, June 27, 2016.)

As for Twitter’s overall appeal, there are at least two reasons for a major buyer like Google to eventually make the offer. Apart from the fact that Google is looking for a major social media app, Twitter has managed to create something that it would find rather difficult, if not impossible, to match: a world-famous social media brand. Many try, but only few succeed. Twitter may not have expanded user numbers, but it surely has gained considerable visibility.

This leaves many potential big-name parties like Google interested. It also keeps the door open for a powerful, but less conspicuous, tech outsider. This should keep TWTR stock riding a bullish wave for the next few weeks or even months.

For some other interesting and bullish investment ideas, consider this: “Defense Stocks: If Hillary Clinton Wins, These 3 Defense Stocks Could Soar.”