The Once And Future Deal For Twitter

Updated on

Twitter’s stock (NYSE: TWTR) has been hovering around the mid-to-upper teens since its most recent peak at roughly $25 per share during the height of acquisition chatter in early October.

But who knows where Twitter will be once 4Q earnings are reported next month? If shares drop to about $10 apiece, the social media giant should be seen as a bargain. Though, Twitter shares have been stubborn over the past year.

Twitter’s share price performance

It remains unclear what an acquisition of Twitter could accomplish for a strategic buyer, whether or not it comes at a bargain, if the company cannot demonstrate 1) a clearer path to steady revenue growth—rather than 3Q’s roughly $100 million loss—and, better yet, 2) a clearer path to being the forum for free and open discussion—rather than abuse—that it aspired to be, and kind of maybe was just a little bit in the first place.

When co-founder and current CEO Jack Dorsey took to Twitter at the end of December for advice on the company’s year ahead, the latter point emerged as the principle concern for users. If it can do either of these things, though, then a strategic acquirer, perhaps one that’s already kicked the tires, will make a bid sometime this year.


And then there’s Trump.

A Bloomberg piece last week cited Mexican currency traders saying, largely in jest, that Mexico should buy Twitter, shut it down, and deny Trump the use of his favorite forum—which has been shown to have a significant effect on the public market. That suggestion just might save the peso from falling even further against the dollar, as the country’s central bank announced that it has already spent some $2 billion propping up its currency, and to no real benefit.

What’s another $10 billion to eliminate the problem?

After all, Trump has said that he fully intends to keep tweeting from his personal account while in the White House—how that’ll work with the extant @POTUS handle in the mix remains to be seen.

“Look, I don’t like tweeting. I have other things I could be doing. But I get very dishonest media, very dishonest press. And it’s my only way that I can counteract,” Trump said in an interview with Fox News.

Looking ahead

At this point, it’s unlikely that Disney (NYSE: DIS) will be among those bidders that circle back to Twitter. Indeed, it’s much more likely that Disney will sell ABC and/or ESPN this year, which could well loop in a tech buyer, perhaps even Twitter, as its securing of rights to stream certain NFL games has been one relatively bright spot recently. The fact is Twitter doesn’t make much sense as a target for any strategic buyer but Alphabet (NASDAQ: GOOGL), which just bought a couple units from Twitter—Fabric, a mobile app development business, and Crashlytics, a tool for tracking software snafus.

But deals made in hot M&A markets typically fail without the kinds of localizing synergies in place going forward that can facilitate more organic forms of growth for acquirers otherwise native to different markets. So, even as China officially scales back its outgoing M&A transaction values to a roughly $10 billion cap and the US begins repatriating overseas earnings alongside a relaxed regulatory process in the US under Trump, we could still see some odd bedfellows come together.

With that in mind, Twitter going to Mexico might not sound so farfetched after all.

Article by Adam Putz, PitchBook

Leave a Comment