Twitter has failed to innovate or accelerate its slumping user growth, so this makes it a logical acquisition target, believes investment banker Victor Basta. Talk of a Twitter buyout is not new, but nothing concrete has come to light so far. It’s dropping stock price, however, certainly makes it an attractive takeover bet.
Valuable for other firms
Twitter shares continues to fall, and recently closed below $25. That is 65% down from its all-time high hit after its IPO in 2013. Apart from the problem with the product and the stock, the company also does not have a permanent CEO two months after the departure of the former CEO Dick Costolo. All this points to one inevitable fact, that the micro-blogging firm will be acquired sooner or later, notes Victor Basta, who is a mergers and acquisitions specialist.
When it comes to finding future business champions, Warren Buffett and Charlie Munger have really excelled over the past seven decades. Q3 2021 hedge fund letters, conferences and more One could argue that these two individuals are some of the best growth investors of all time, thanks to their ability to spot companies like Coca-Cola Read More
“Market expectation was that Twitter, having created a completely differentiated platform, would accelerate innovation and introduce products and features that would justify a $60+ share price,” Basta said. In contrast, innovation has almost festered, user growth has slowed and current users are not that active.
Basta, who is a managing director at boutique investment firm Magister Advisors, believes Twitter is a logical acquisition candidate for a firm like Google or Facebook. The micro-blogging will be more valuable in pushing innovation at other companies than growing itself as a public firm, Basta said.
Missed opportunity by Twitter
“Twitter still has an opportunity to be a successful standalone business, but to date it has squandered that opportunity,” Basta said. Since 2008, the micro-blogging firm made about fifty acquisitions, but despite this the overall user experience has not been changed much. The platform still has loads of crowdsourced data, but without a way to efficiently manage and utilize it, the data has little significance.
Though the company is making efforts to monetize the platform (thanks largely to the acquisition of mobile ad-network company MoPub), the platform still lacks new features to attract more users to the network.
There is a good chance the stock will decline further, unless something positive comes up such as the announcement of a new CEO. But even that will be temporary in nature. Short interest in the stock jumped by more than 27% from 28,989,995 shares on July 31 to 36,997,885 on August 14.
As of around 11.30 am EDT Wednesday, Twitter shares were down 1.12% at $24.19. Year to date, the stock is down over 32%, while over the last year, they are down almost 50%.