Twitter Inc shares were down 5.6% on Monday to $29.27, their lowest level since the IPO in 2013. Now, investors and insiders are worried that with such a low valuation, makes the firm a potential takeover target.
Does Twitter want to be get acquired?
The sharp decline pushed the market cap of the firm below $20bn, making it an attractive takeover target for firms such as Google, says a report from Bloomberg. Apart from Google, another firm that could acquire Twitter is Facebook, which has been known for making big purchase. Last year, the social network acquired WhatsApp for $22bn.
For Google’s 2016 earnings to benefit from the purchase, Twitter’s price need to be around $11.16 while for Facebook to benefit the stock should be around $20.78, claims data from Bloomberg.
“If you were to go down a list of large tech companies with big cash piles, many of those names would make a lot of sense to at least have casual engagement with Twitter now,” Ted Hollifield, co-head of the venture and merger and acquisition practice at Alston & Bird LLP told Bloomberg.
There are experts who believe that the firm is intentionally pushing the stock down, “because their strategy is to be acquired,” Jeff Sica, president of Sica Wealth Management, told Bloomberg. “I’m advising anyone that owns Twitter to hold, because I do think at this point there’s going to be an acquisition.”
Why are investors afraid?
It seems that last week’s comments from interim CEO and co-founder Jack Dorsey and CFO Anthony Noto has lowered the confidence of the investors on the micro-blogging firm. The executives warned that it will take some time before the firm is able to revert the slowdown in the user growth. The firm also noted that the demand from the advertisers was below the expectations.
A report CNBC, citing sources say executives and investors are frustrated with Noto, who last fall painted a rosy future, but last week drove down the expectations, when he said a noticeable growth would “take a considerable amount of time.”
Apart from the negative outlook, another factor pushing the stock down is the constant exit of top executives. Last week, three key executives left Twitter including director of product management, Todd Jackson; head of growth, Christian Oestlien and Twitter’s apps in charge, Trevor O’Brien.
Troubles for Twitter does not seem to be over atleast until it comes with a stable leadership. The firm is still searching for a new CEO. Dorsey and revenue chief Adam Bain are seen as top names for the CEO post. The search committee is also pressurizing Dorsey to decide if he wants to be even considered for the post, says CNBC citing sources.