Twitter (TWTR) stock jumped 4% after billionaire Steve Ballmer disclosed a 4% stake in the company. Given that Ballmer was the former CEO of Microsoft (MSFT), and given his roots in technology, investors figure that if Ballmer is buying Twitter stock, they might as well too.
However, that’s not exactly true.
Ballmer’s Track Record Isn’t Great
The notion that Ballmer will have some influence on the direction of Twitter is not something that Twitter stock investors should hope for.
While Microsoft stock has surged 70% over the last decade — a tenure where Ballmer was CEO — Microsoft stock did not really break out into a new trading range over $40 until Satya Nadella took over. It was Nadella who moved away from the software licensing business model and into cloud subscriptions, and moved into cloud infrastructure services as a whole.
Until Nadella took over, MSFT lacked an identity, and there were legitimate concerns regarding its longevity.
In fact, one of Ballmer’s last big moves was to pay $7.17 billion for Nokia’s handset business. It was a move that Bill Gates and Nadella reportedly opposed, but one that Ballmer wanted.
Ultimately, Ballmer got what he wanted, and just one year later MSFT took a $7.6 billion write-off charge on the acquired handset business. Therefore, one could make a legitimate argument that Ballmer is not exactly the guy that Twitter stock investors want to influence CEO Jack Dorsey.
The best that TWTR investors can hope for is that Ballmer is a quiet investor who is simply a fan of the company. However, that’s not exactly Ballmer’s style.
Don’t Assume Twitter Stock Is Cheap
Steve Ballmer is reportedly worth more than $22 billion, so there’s not much in this world that he can’t buy. This is the same guy who last year paid $2 billion to acquire the L.A. Clippers, which is the second most popular pro basketball team in Los Angeles — a team that doesn’t even own its own arena and was valued at just $575 million by Forbes prior to Ballmer’s purchase.
However, Ballmer called himself a “huge” basketball fan, and has said numerous times that buying the Clippers wasn’t about making an investment, but rather owning something he loves and wants to be a part of.
Given Ballmer’s thought process, maybe he’s just a big fan of Twitter.
Ballmer recently created a new Twitter account and has tweeted four times this month. Also, social media is an area that Ballmer tried to dabble in while at MSFT, reportedly trying to buy Facebook (FB) for $15 billion! So, investors can’t write off the possibility that Ballmer loves Twitter, and just wanted to be more involved with the company … which, as we just discussed, isn’t the greatest thing in the world for Twitter stock investors.
Nonetheless, Twitter stock is surging higher behind Ballmer’s investment, and it’s no surprise that TWTR is doing so. Just don’t assume that Ballmer is good for TWTR or that he tried to buy it cheap.
Fact is that Ballmer might see Twitter like he does the Clippers — something fun to be a part of when you have $20 billion in the bank.
For the rest of us, the reasons to own something are much different.
Brian Nichols does not own any of the stocks mentioned in this article
