Twitter (TWTR) stock saw some weird activity Wednesday afternoon after it surfaced that News Corp (NWS, NWSA) was interested in acquiring the social media company.
Twitter stock was trading near an all-time low at the time, but the idea that NWS would attempt a stock takeover or acquisition of TWTR is still far-fetched.
In fact, finding any company that wants to acquire Twitter, even at its current market cap of about $12 billion, would be difficult.
Twitter is struggling to grow users, its new product ambitions have yet to prove successful in re-engaging its existing audience and it’s under tremendous pressure from competition.
Why Would NWS Want TWTR?
Twitter prides itself on breaking news before the major publications like News Corp’s get their hands on it. Perhaps the theory went that News Corp wanted access to Twitter’s fire hose of information to find breaking news before everyone else. Of course, there are much simpler and less expensive ways of getting its hands on that information.
Twitter stock investors know the value of Twitter’s data because it breaks out its data licensing revenue every quarter. In the third quarter, the company generated $56 million from licensing its data, up 37% from the year-ago period. NWS could just tap that data for a tiny fraction of the cost of acquisition.
Another possibility is that News Corp’s recently acquired Unruly Media business saw outsized strength in Twitter’s video advertisement products. NWS acquired Unruly Media in September. The company specializes in distributing and tracking video ads across social media.
Twitter’s ad revenue continues to climb rapidly despite slow user growth, and one factor for its ad revenue growth is its video ad unit. Ad revenue grew 60% year over year last quarter despite user growth of just 11% with the most generous of standards.
Why NWS Won’t Buy TWTR
There are still a lot of question marks surrounding Twitter stock and it doesn’t seem like News Corp is in any way positioned to solve the company’s problems. While NWSA has several properties experienced in growing a digital audience, it’s not going to solve the core problem of Twitter’s stagnant user growth.
What’s more, the competition is only getting stronger. Facebook (FB) just announced a new feature called “Sports Stadium,” providing real-time updates on sporting events, featuring scores, expert analysis and commentary from your friends. Snapchat, meanwhile, has a “Story” for every NFL game and major event in the world, featuring the top content from its users.
There’s a reason Twitter stock is trading at such low multiples — because it’s not worth paying a premium for at this point.
There are no signs the company will be able to continue its rapid revenue growth. News Corp, or any other company, won’t be able to solve that issue any better than Twitter could on its own.
Twitter stock investors who jumped in with the hopes of a takeover may be holding on for a long time. And it’s not going to be an easy ride.
As of this writing, Adam Levy did not hold a position in any of the aforementioned securities.
