Written by Ophir Gottlieb
PREFACE
The takeover rumor saga that has driven Twitter Inc. (NYSE:TWTR) stock to fresh highs will reportedly all come to an end by October 27th. That appears to be the drop dead date for Alphabet Inc. (NASDAQ:GOOGL), Salesforce.com (NYSE:CRM) and Walt Disney Co (NYSE:DIS).
STORY
Liana B. Baker and Jessica Toonkel of Reuters reported that the takeover bidding process for Twitter Inc. will end, for better or worse, by October 27th. In their report, the two journalists note that the company wants to be done with this saga by the time it reports its next earnings, and that comes after the market closes on October 27th. There appears to be no special handling for any of the bidders, including the hallowed Alphabet Inc. (NASDAQ:GOOGL).
It's been no secret that Twitter Inc. (NYSE:TWTR) CEO Jack Dorsey does not want to sell the company. Not only has Business Insider recently reported on it, I was personally at the Twitter Inc. shareholder meeting last year and Jack Dorsey was asked explicitly by an audience member if he wanted to sell the company. Jack replied, to paraphrase, "no."
As I mentioned on TV in the following weeks, I'm not sure a CEO can say anything else to that question, even a "no comment" could send reverberations throughout the market, so "no" was the de-facto answer. But, when I met with him ever so briefly after the Q&A session, I got the feeling that this man wants Twitter Inc. (NYSE:TWTR) to stay independent, and that its mission was not complete.
For my part, I told him quietly that whatever the case, he needed to personally make sure that Twitter Inc. (NYSE:TWTR) stayed around -- its role in the world to ease pain was far too important.
All the touchy-feely stuff aside, we now have a pretty good feeling for which firms are at least considering bids in this takeover story. It looks like Salesforce.com Inc. (NYSE:CRM) is in. Salesforce.com Inc. CEO Mark Benioff was on CNBC today, was asked directly by Jim Cramer, and he certainly didn't deny a possible bid, though he did his best two-step to avoid a direct answer -- again, likely the only feasible response.
It does appear that Alphabet Inc. (NASDAQ:GOOGL) is in the running as well, with reports out that the firm has hired Lazard as a bank to consider the options. Then, of course, there is Walt Disney Co (NYSE:DIS). As I said on TV in that same interview, Walt Disney Co (NYSE:DIS) relies heavily on its ESPN franchise and for the first quarter ever, it saw declining viewership. With Twitter Inc. (NYSE:TWTR) getting oh so comfortable with live streaming of sports events and with Jack Dorsey already on the Walt Disney Co (NYSE:DIS) board, an argument could be made for that takeover as well.
In all, a media company likely sees much less value to the Twitter Inc. (NYSE:TWTR) ecosystem, user base, and data than a technology company, and that means if a winning bid is submitted, it will likely come from either Alphabet Inc. (NASDAQ:GOOGL), Salesforce.com Inc. (NYSE:CRM), or a surprise technology bidder.
RISK
There is big risk here that may have been overlooked. After the analysis is done, it's quite possible that a proper valuation for Twitter Inc. (NYSE:TWTR) could be below the current market cap, and that means, no sale, and likely, a tumbling stock price to unravel the rather abrupt rise that has come on the heels of the takeover saga. With formally no interest from Alphabet Inc. (NASDAQ:GOOGL), the "takeover put" goes away and Twitter Inc. (NYSE:TWTR) stock could find a nose dive.
Perhaps the best news of all is that this will (likely?) be over by October 27th. And, for the record -- it's quite possible that Twitter Inc. (NYSE:TWTR) will report better user growth and advertising numbers than Wall Street is expecting for that quarter, and that the dire narrative that insists that Twitter Inc. (NYSE:TWTR) cannot make it on its own could die just as quickly as the takeover bidding process ends.
CAVEAT
The caveat here is a big one. While Jack Dorsey and (or) the board of directors of Twitter Inc. (NYSE:TWTR) may reject a bid, if the bidding company decides to take its takeover price to shareholders, we will be faced with a hostile takeover process and that can drag out for quite some time. That would be takeover saga number two.
The author is long shares in Twitter Inc. (NYSE:TWTR), and has no position in Alphabet Inc. (NASDAQ:GOOGL), Salesforce.com Inc. (NYSE:CRM) or Walt Disney Co (NYSE:DIS).
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