Normally I would not touch a company like Twitter (TWTR), given that it continues to be loss-making.
However, post the acquisition of Linkedin (LNKD) by Microsoft (MSFT), I was intrigued, and feel that Twitter could be an excellent acquisition for either:
- an industrial player, who can perhaps properly monetise the Twitter social media platform and also take out some cost, or
- a financial investor like a private equity company, who can act as a brutal turnaround expert, cut costs and get Twitter into profitability by ruthlessly focusing investments on projects that can lead to profitable growth.
So I have just bought a position in Twitter (TWTR) at a smidgeon over $18 per share, with a stop-loss level set under 10% lower down.
The stock has clearly already fallen a long way from a recent peak near $25 to $18 on the back of news that potential suitors Google (GOOGL), salesforce.com (CRM) and Disney (DIS) are all pulling back from making a bid.
But this article on bloomberg.com is interesting in that it makes the case for a financial buyer to take Twitter over.
Personally I think that one of the three industrial buyers above could renew their interest, now that the share price has returned to earth with a bump.
Note that Twitter was IPO'd originally at a $26 share price, it retains around $2.50 per share in net cash (according to finviz.com), is growing advertising revenues as of Q2 2016 at an 18% annual clip (yes, this is much lower than in previous quarters, admittedly).
I think that a takeout price could eventually be around $24/share.
Edmund
