Twitter Inc. continues to sink deeper and deeper into the miry clay of bear kingdom and it appears that the only thing that can save the firm now is a buyout or a takeover by a bigger player. However, Jeff Reeves opines that Twitter is not a viable acquisition target at the moment and that BlackBerry Ltd , has looks more attractive for a buyout than Twitter. Twitter and BlackBerry had tough times that saw them losing investor confidence, but BlackBerry has a better chance of courting buyers than the former.
Both firms have been linked to series of buyout rumors over the last couple of months such that it doesn’t really make news again. With BlackBerry, Cisco Systems has been linked to buyout talks, Apple has been fingered as a potential buyer, Google was once rumored to be in talks to buy the firm, and it appears that the rumor mills have placed a target on Microsoft as the next in line to buy BlackBerry , .
Twitter has also had its fair share of buyout rumors. Google was once in the crosshairs as the most probable firm to buy it and Facebook also made the honor roll as a potential buyer. In addition, analysts seem to think that a takeover is imminent even as the firm finds it hard to name a permanent CEO.
Overvalued for a takeover
Twitter doesn’t hold much value for takeover contrary to what the rumor mill suggests. Some analysts believe that it is still overvalued to make an attractive takeover target. For instance, Josef Schuster of Ipox Schuster which is an institutional investor with Twitter says that the shares of Twitter might fall to $17 before its starts to generate takeover interests. In his words, “That’s a level that could attract some more interest…It makes more sense for Google to buy than for anybody else, but it needs to settle first.”
Twitter doesn’t have much value for another tech firm because it has not be able to monetize its platform. The only attraction that it has is its user base which stands at a generous 316M users if you don’t remove spam and bot accounts. With 316M users, Twitter has market cap of $18.15B.
When Instagram was acquired for $1B in 2012 when it had 30M users. Simple maths suggests that each Instagram user was worth $33.33. When WhatsApp was acquired (for its user base), it had 450 million users; yet it fetched only $19B. Simple maths suggests that each WhatsApp user was worth $42.22.
If each Twitter user was worth $50 (a most generous number), Twitter should have a fair value of $15.80B. In essence, Twitter will need to lose about $2.35Bin its market cap before it can have a fair valuation.
Twitter’s dismal chances of a Takeover
Jeff Sica, president of Sica Wealth Management, told Bloomberg that the possibility of a Twitter acquisition is zero. He says, “I’m advising anyone that owns Twitter to hold, because I do think at this point there’s going to be an acquisition.”