I guess it’s that time of year again: time to bounce around baseless Twitter (TWTR - Analyst Report) buyout rumors. The latest would-be purchaser is News Corp (NWS - Snapshot Report) (NWSA - Analyst Report), joining the ranks of formerly-rumored buyers like Facebook (FB - Analyst Report), Alibaba (BABA - Analyst Report), and Apple AAPL).
On Wednesday, rumors that News Corp was interested in scooping up the embattled social media site sent Twitter’s stock soaring as high as 12%. These gains fell down to the 4% range after a News Corp spokesperson told Re/Code bluntly, “The rumor’s untrue.”
There it is, folks. Pack your bags and move along, nothing to see here. Just another baseless Twitter buyout rumor.
Now wait… you’re telling me Twitter is up another 4% today? People are still talking about a possible buyout?
Well, shoot. You got me. Let’s talk about a possible Twitter buyout.
Not A Bad Idea
Whether or not the News Corp rumors hold any truth don’t change the fact that a buyout could be could for Twitter, and with share prices near record lows, now would certainly be the time for a buyer to step in.
There are basically two schools of thought here. The first is probably the mindset of many Twitter investors who are fed up with the company’s lackluster performance. Twitter simply hasn’t been able to grow its user base a significant amount, and the company has struggled to cash in on existing users anyway.
Recently re-hired CEO Jack Dorsey is splitting his time between Twitter and his mobile payments startup Square (SQ - Snapshot Report), and his recent moves, such as the launch of the Moments feature and proposed increase of the 140 character limit, don’t seem to be exciting investors all that much.
With share prices near all-time lows, a company looking to buy Twitter could make its move now at the lowest possible cost. It’s often been said that having Twitter be a part of a larger company could open up new revenue streams or boost user growth. Also, Twitter doesn’t currently offer preferred shares, so it wouldn’t be too difficult for a single motivated activist investor to start making moves.
The other school of thought here puts a lot of faith in Dorsey and the direction he wants to take the company. To be fair, Dorsey has only been on the job again for four months. The company also recently announced plans to start cashing in on unregistered users. For years, Twitter has claimed that upwards of 500 million users visit the site every month, but the company previously had no plan to advertise to these people.
Who Could Make It Work
With that being said, one can only imagine the companies that could make Twitter’s tools work better. Remember, Twitter has more than just the classic timeline-based social media platform. Its other applications, Vine and Periscope, and its ad technology MoPub, could pique the interest of a larger tech company like Facebook or Google (GOOGL - Analyst Report).
While it would be surprising if a buyer just completely overlooked the social media element of Twitter, it would make sense if another tech leader felt that it could use these other tools better.
On the other hand, a media conglomerate like Comcast (CMCSA - Analyst Report) or Disney (DIS - Analyst Report) could put Twitter to good use. We’ve recently seen Twitter team up with entities like the National Football League to promote Twitter-exclusive content to fans. A media firm might be able to promote their own content in similar ways.
Bottom Line
When dropping names like this, it’s important to be very clear that there doesn’t appear to be any substantiated rumors of a buyout right now. Although the News Corp talks were denied, the news restarted a conversation that we’ve been having for a long time.
Twitter has been struggling for too long, and it needs to do something different. Some may have faith that the Dorsey era will bring that change, but other investors are desperate for someone else to take control.
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