An interesting article on Bloomberg (Article here) discusses the plea made by Twitter CEO Jack Dorsey to stay the course, not making mention of recent speculation of a buyout that has caused the share price to jump nearly 20% since late September. The article goes on to discuss that two of the speculated Twitter Bidders have since backed out causing the share price to revert to levels prior to the buy-out speculation. We’ve commented extensively in the past that with waning interest in the platform as measured by Google Trends and the inability to turn a profit have been the major reasons why we believe the company’s prospects to be grim.
Looking at this from the perspective of a potential bidder, the interest in the company would likely be for it’s synergies with current operations and the ability to leverage the platform to deploy existing assets. While there may be many synergies for companies like Alphabet Inc. or Walt Disney Company there would have to be a level of comfort in taking on a company continuously in the red, waning interest, and the fact that you’d likely have to offer a significant premium to existing investors to part ways with their control of the company. We feel that these factors are not conducive to a Twitter buyout at least not at the current valuation. The end result will likely be Twitter continuing down it’s path as outlined by Dorsey.
We perceive Dorsey’s plea to existing employees as a tactical one as it could possibly mitigate any collateral damage to Twitter’s image in the event that all bidders for the company were to back away. Secondly, Twitter is Dorsey’s brain child and this venture is more personal than business. Assuming this, he’d likely want to see through the game plan that he has outlined for the company with the intent of turning fortunes around as this may be more difficult under a parent company.
Using Google Trends as a barometer of interest in the company, unless we notice an uptick in interest, with or without potential bidders, we continue to maintain our conviction that the company’s fortunes look grim.