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Twitter no longer too big to be acquired
With share prices crashing hither and yon, plenty of companies could soon be attractive takeover candidates, and that includes Twitter (NYSE:TWTR).
Magister Advisors, mergers & acquisitions (M&A) advisers to the technology information reckon that, at US$25 a share, the social media network could be worth a lot more to a business that could accelerate innovation.
The M&A specialist has added Twitter to its ‘Icarus’ list of businesses that have achieved valuations too far ahead of legitimising revenues; Icarus, of course, was (according to Greek legend) the man who flew too close to the sun and plunged to his death.
“One of the tensions in social networks is what we describe as the ‘passing through’ versus the residential. Facebook, for instance, is a ‘residential’ property, like a social living room decorated with individuals’ ‘assets’. Twitter, on the other hand, is like the social media equivalent of AirBNB,” suggested Victor Basta, managing partner at Magister Advisors.
Having floated at US$26 a pop in late 2013 and peaking at 69 bucks at the beginning of 2014, the company’s shares now languish below the initial public offering price; they closed at US$25.87 on Friday and with the market set to take another heavy tumble this morning the US$17.5bn market capitalisation of the firm is likely to be shredded further.
“Market expectation was that Twitter, having created a completely differentiated platform, would accelerate innovation and introduce products and features that would justify a $60+ share price. Disappointingly, innovation for users has largely stagnated. Furthermore, user acquisition numbers have slowed and many sign up and don’t activate,” Basta asserted.
“Granted, Twitter is now able to monetise the platform thanks to previous acquisitions (e.g. Mopub) and its own efforts. What has been lacking, though, is product and feature innovation and this is driving down platform value. Contrast that with Facebook’s huge and successful transition to mobile. Analysts expected it to falter. Facebook now captures a huge percentage of mobile ad spend and has multiple mobile-first products to maintain engagement. As a result Facebook’s platform value has soared. Twitter’s experience has been the opposite,” Basta said.
While Basta would presumably be only too happy to see Twitter “in play” as a takeover candidate, he said the company says Twitter still has an opportunity to be a successful standalone business, but with the user experience not having changed much since the service was launched, and user acquisition growth slowing, the service could be about to enter the sort of death-spiral that did for MySpace.
“At US$17.5BN Twitter is no longer too big to be acquired. A logical acquirer for Twitter would be from two camps: organisations with larger user networks (Facebook / Google) or a news organisation with an interest in real time data. Both would bring a strategic user-focused discipline to a business,” Basta concluded.
Story by ProactiveInvestors
Source: http://www.proactiveinvestors.com/companies/news/63149/twitter-no-longer-too-big-to-be-acquired-63149.html
