Facebook Inc (NASDAQ:FB), and Google Inc (NASDAQ:GOOG), (NASDAQ:GOOGL) are both looking to buy Twitter Inc as the price of the firm stays in a slump after CEO Dick Costolo lost his job. A special report on Fox Business News on Tuesday evening highlighted the rumors, and Charlie Gasparino said that his sources told him a deal was on the cards.
Mr. Gasparino said in a tweet on Tuesday afternoon that “as shares fall, banking sources say $TWTR is open for a sale to $GOOGL or $FB.” Twitter is valued at more than $20 billion even after the large loss of value of the last two months. That makes the firm a difficult buyout target, and one that would change the relationship that either Google or Facebook has with investors.
Searching Google, Facebook for intent
Mr. Gasparino went on to disappoint those that tuned in eagerly to his show on Tuesday. He revealed that his sources said, “Twitter would be open for a sale at this point.” There was little element of insider info about the story, it was just the opinion of a couple of Wall Street bankers on the firm’s position.
At the same time the rest of Wall Street is not betting on a buyout, and Google and Facebook shareholders seem relatively uninterested in the future of Twitter. Shares in the firm have fallen by close to 6% over the last five days, even as rumors that either Facebook or Google was looking to buy the firm gained weight.
Mr. Sean Udall of Quantum Trading Strategies told Benzinga that interim CEOs are often brought in to a company to secure a sale. Mr. Dorsey is a big shareholder in Twitter, and his CFO Anthony Noto is a former Wall Street banker. That’s a dream team to secure a sale, but it doesn’t mean that any big firms are actually interested.
Twitter has nothing going for it
MKM Partners analyst Rob Sanderson downgraded Twitter shares from Buy to Neutral on Tuesday. He said that there was nothing that “would lift the sentiment on the stock over the next two quarters.”
Mr. Sanderson says that Jack Dorsey, currently interim CEO at the firm, could be a good fit in the long term. He also says that engagement with Google and growth in periscope could be good for the stock long term, but in the near terms very little looks good for Twitter.
Even the rumors from Charlie Gasparino, who made his name by having the inside track on many M&A deals, isn’t enough to shift the mood of investors at Twitter.
The worry is that even if Google or Facebook were to bid for the firm the premium might be small or zero. Twitter is no longer in a high growth phase, meaning that it may not be able to go for beyond its already inflated value in a big buyout.
Google and Facebook, meanwhile, are battling each other where things really matter. Twitter, and a deal with either of the firms, remains a marginal sideshow, though the rumors and gossip excite Wall Street.
Both firms are battling over what the future of the connected world will look like. Facebook with its more engaged user base and mobile dominance is looking like a favorite, but Google has a few tricks up its sleeve in order to keep users on the web.
Shares in Twitter were up a small fraction in early morning trading Wednesday after closing up 0.4% to $34.81 on Tuesday.