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Twitter Buyout Chatter Grows Louder, Might Get Bids Soon

Zacks Equity Research

Twitter Inc TWTR may formally receive bids this week, reports The Wall Street Journal. The development came on the heels of Twitter investor Chris Sacca’s disclosure that he has been selling his stock and hopes that a buyout can turn things around for the micro blogging site.

Sacca while speaking to Bloomberg stated “I hope for an acquisition. I think there are some great product teams this fits in with naturally. And that’s not a new thing for me, I have been saying this for a long time. I think it’s a natural complement to at least four or five companies out there.”

The list of possible suitors includes the likes of Alphabet Inc. GOOGL and Microsoft Corp. MSFT, with salesforce.com, inc, CRM and The Walt Disney Company being recent additions. Alphabet remains the favorite with speculators, given its diverse platforms that could make the integration of Twitter easy. Also, both the companies have an arrangement whereby tweets appear on Google’s search engine results page. Reportedly, Alphabet has sought merger and acquisition advice from Lazard Bank to evaluate the feasibility of the acquisition of Twitter. On to Microsoft, it has ample liquidity (net cash of $59.55 billion as Jun 30, 2016). So why not spend on the data Twitter will add? After all it intends to be a leader in the artificial intelligence space. It earlier won the bid for the professional networking site LinkedIn for $26 billion.

However, Salesforce might give serious competition to the two tech behemoths. After a failed attempt at snapping up LinkedIn, Salesforce is eager to get its hands on Twitter’s valuable data. Citing sources, WSJ reported that Salesforce CEO Marc Benioff apparently views Twitter as an “unpolished jewel” that has tremendous prospects in advertising, e-commerce, which bodes well for Salesforce's next stage of growth.



Reportedly, the Salesforce bid moved Twitter to action. Twitter recently hired Goldman Sachs Group and Allen & Co. to review prospective buyers.

Disney as a suitor for Twitter is somewhat weird. But then Twitter’s sports live streaming efforts could make it an unexpected hero for the media giant. As cord cutting puts strain on ESPN, will the coming together of Twitter and ESPN aid the rescue effort?

It’s all good in theory. Undoubtedly, Twitter’s vast data collected from its 300 million plus users can be leveraged by many companies but it brings along a plethora of problems including profitability issues ($100 million plus in quarterly losses), severely under monetized platform, and the infamous trolling. 

The company’s hefty price tag complicates the situation further. Per reports, a potential acquirer needs to shell out over $16 to $20 billion for Twitter based on the multiple used by Microsoft to acquire LinkedIn for $26 billion earlier this year. That’s loads of money and as a result, speculations are rife that Twitter might not be able to put up the “sold” signboard soon enough. If Twitter gets a bid lower than its existing valuation, it might choose to continue with its standalone status.

At present, Twitter carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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