Reports that the Twitter Inc (NYSE:TWTR) board would discuss only cost cuts at today’s meeting — and not a sale of the company — caused TWTR stock to tumble in premarket trading.
Rinse, repeat.
With stagnant user growth, greater competition from Snapchat, increased pressure from the digital ad duopoly of Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) and Facebook Inc (NASDAQ:FB), time is running out on TWTR pulling off something truly transformational.
Twitter’s content strategy — which includes everything from live streaming coveted NFL regular season games to lesser watched news programming — has some potential. But it’s hardly the sort of difference-maker that is going to give TWTR the scale and user attention it needs to compete as a truly mass-market social platform.
At best, TWTR is tinkering around the edges as it tries to catch up to FB and GOOGL — and stay a step ahead of Snapchat. The market knows this is ultimately folly. User growth is going nowhere in a business that is all about scale. A cursory look at the Twitter stock chart shows that shares have been a trading tool only.
Twitter stock is rapidly closing in on a 52-week loss of 30%. On the day it went public almost three years ago, TWTR closed at $45. Today it’s worth less than half that amount. Even those who got in at the initial public offering price of $26 a pop are underwater.
Twitter has above-average volatility, which again might make it suitable for trading. For investors, however, it has been a buy-and-hold loser with no credible plan to fulfill yesterday’s hype.
No wonder shareholders are so hot for a sale.
TWTR’s Unhappy Status Quo
It’s hard to believe the subject isn’t on the board of directors’ agenda. A company like Twitter would be remiss if it weren’t at least considering “strategic alternatives.” Cost cuts and asset sales (Vine, perhaps?) buy time. They conserve or bring in cash and give investors the impression that management knows what it’s doing — if only they had more time to execute.
It’s becoming increasingly clear to an ever-larger portion of the market for TWTR stock that no such miracle is coming. The best we can hope for is for Twitter to be taken out by someone bigger with deeper pockets. That’s why Twitter stock moves by 5% one way or the other every time an acquisition rumor is floated (or dashed).
It really does feel like only a matter of time before an independent Twitter is no more. The market for questionable digital properties has never been hotter. AOL, Yahoo Inc. (NASDAQ:YHOO) and LinkedIn Corporation (NASDAQ:LNKD) all negotiated peace — er, exits — with honor.
With a market cap of $14 billion, Twitter is worth roughly the same as LinkedIn was when it agreed to sell itself to Microsoft Corporation (NASDAQ:MSFT). If a stumbling, email-spamming social network for job seekers could get a 50%, why not Twitter?
If the latest reports prove true, TWTR shareholders will have to wait past today to enjoy some kind of M&A exit. Until then, they have little choice to be patient.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.
