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Twitter Inc (TWTR)’s Acquisition is Bound to Happen Sooner or Later

Twitter Inc (NYSE:TWTR) Walt Disney Co (NYSE:DIS)

Twitter Inc has reached a point in its 10-year history when it is natural for an acquisition, takeover, or merger to happen. In fact, the heroics of CEO Jack Dorsey’s turnaround plan and the firm support of the board for the plan is the only thing keeping the firm away from the market. Nonetheless, Twitter has had a consistent flow of false alarms and rumors about potential takeover or acquisition talks.

Twitter Inc

Steve Ballmer joins the list of potential Twitter buyers

The latest rumor in town is that former Microsoft CEO, Steve Ballmer and Saudi Arabia’s Prince Al-Waleed bin Talal want to buy Twitter. The rumor mill has reported that that Ballmer and the Saudi prince are forming an alliance to buy the firm at a target price between $22 and $26 per share.

When the news broke, the shares of Twitter were trading at $16.34 and the target price band suggests a 22% to $58 upside on its current stock price. Wall Street took the news of the rumored buyout gladly and the stock gained a massive 7.25% to close the session at $17.61 per share. The surprising turn of events  that led to the price gains after the rumors suggests that investors know that Twitter has potential value even though management has been unable to monetize the platform.

Many analysts have debunked the rumors of the potential buyout by Ballmer and the Saudi prince. SunTrust analyst Robert Peck observes that “We think it is extremely unlikely that Twitter would want to sell currently” because the turnaround plan is still underway.  More so, neither Ballmer nor Al-Waleed has confirmed or denied the rumor; in fact, Ballmer reportedly employed the “no comment” response when he was asked about the deal.

There’s an element of truth in every rumor

Everybody seems to have agreed that stories about Ballmer’s move to buy Twitter is nothing more than a rumor. In fact, Wall Street is likely to take the debunking of the news with angst when the market opens – the stock has already lost 0.04% in premarket trading. Nonetheless, “there is sense in every nonsense” and there’s an element of truth in the rumors about Ballmer’s plan to buy Twitter.

It is important to note that both Ballmer and Al-Waleed are firm believers in the bright prospects of the firm. In October 2015, Ballmer revealed that has bought a 4% state in Twitter; in fact, Ballmer has more shares of Twitter than Jack Dorsey who is both the co-founder and CEO of the firm. Prince Al-Waleed personally owns a 4.5% stake in the firm, he and his investment firm Kingdom Holding own more than a 5% stake in the firm.

In October 2015, Ballmer also posted a number of Tweets that reveal his outlook on the firm. One of the tweets reads, “Good job @jack Ceo, leaner, more focused. Glad I bought 4% past few months. [email protected] move too.” In another tweet, he said “I think @twitter is remarkable. There is amazing chance to innovate and grow. Excited to see progress with @jack as CEO Impressive dude!”

It is a season of mergers, takeovers, and acquisitions in the tech industry as bigger firms snap up smaller rivals in order to unlock doors into emerging market.  In this season of increased M&A activity, the eventual purchase of Twitter is likely to be the rule and not the exception.

 

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Victor Alagbe is a seasoned business and finance writer with a specialty in writing about how to invest for the long-term in healthcare, pharmacology, energy and tech stocks. His long-term focus is on stocks that provide a nice mix of growth and income. For the short term, he passionately writes about trading stock options for the excitement and leverage that stock options offer.

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