Twitter Inc (NYSE:TWTR), which rallied earlier last week on rumors of a buyout, plunged almost 18% on Oct. 7 after a report ruled out some major potential buyers. Takeover rumors have circulated around TWTR stock for years, but with multiple channels reporting that a serious offer is still on the horizon, this is a great time to consider which company could see a strategic benefit to owning it.
Twitter needs to have come just about as far as it can go as an independent entity while still presenting enough buried strategic value to tempt a buyer with big ambition and deep resources.
If management is seriously considering an offer now, that means that the first condition has been more or less satisfied.
So the real question is: Who might see enough transformative value locked up in TWTR stock to view the current price action as a base for bigger and better things ahead?
Firstly, I think talk about Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) or Facebook Inc (NASDAQ:FB) reaching out to absorb their rival social network is overdone. Odds are extremely good FB already has most of TWTR’s 300 million active users somewhere in its cloud and those same people represent much better revenue sources on the FB platform than they are for TWTR.
Likewise, GOOGL doesn’t exactly need to spend $20 billion or so buying into redundancy. They’re far more likely to buy a startup, build to critical mass and take what they need.
TWTR Stock: Who Could Benefit From Twitter Now?
Salesforce.com, Inc. (NYSE:CRM) comes up a lot in the chatter because management there has a known passion for Big Data. Buying TWTR would open up 300 million active profiles at once, many of them stretching back close to a decade. We know CRM tried hard to outbid Microsoft Corporation (NASDAQ:MSFT) for LinkedIn Corp (NYSE:LNKD) earlier this year.
However, LNKD naturally aligned with CRM due its professional network, whereas Twitter’s more celebrity-driven landscape may not fit into Salesforce’s marketing engine. LinkedIn squeezes 48% more revenue out of a third of the active population on TWTR — it’s simply a higher-quality audience in terms of data.
So if it’s not the social consolidation or the data, the biggest strategic win here may be for a buyer looking to cross over into the world of user-generated, ad-supported content. There were whispers about Walt Disney Co (NYSE:DIS) stepping up — possibly bolting Twitter’s blend of gossip and news to the larger infotainment empire. In this model, TWTR would simply become another pipe through which ads can flow; another channel like ABC or ESPN, only with “viewers” generating a whole lot of the experience on their own.
Unfortunately, DIS was more or less ruled out last Friday, which is part of the reason why TWTR tanked. At one time CBS Corporation (NYSE:CBS) and Viacom, Inc. (NASDAQ:VIAB) may have stepped up, but they’re busy mapping their internal future even as we speak. And Twenty-First Century Fox Inc (NASDAQ:FOXA) has been burned before with the now-defunct MySpace.
TWTR stock seems to have hit a strategic wall, but it isn’t exactly in distress. Someone with the right ideas and the ability to execute without killing what’s already there can take them up to the next level. When that happens, the buyer’s only responsibility is to avoid remorse. In the meantime, current shareholders are probably just here for the exit.
Hilary Kramer is the editor of GameChangers, Breakout Stocks Under $10, High Octane Trader, Absolute Capital Return and Value Authority. She is an accomplished investment specialist and market strategist with more than 25 years of experience in portfolio management, equity research, trading, and risk management. She has extensive expertise in global financial management, asset allocation, investment banking and private equity ventures, and is regularly sought after to provide her analysis on Bloomberg, CNBC, Fox Business Network and other media.
