Twitter takeover looms as share price drops

By on August 13, 2015

By Adam Gale

The social network has lost half its value since April, making it a bargain for hungry tech giants.

It’s not a happy time for Twitter. First its executives – following former boss Dick Costolo – started flying the nest and now its shares are nose diving. It has fallen 3.7% and is down 5% since its second quarter results last Tuesday and 47% since the previous results came out in April.

What’s given investors the jitters is that, although Twitter’s revenues are growing nicely, its expansion seems to be stalling. The number of monthly unique users rose 12% on the same period last year, but barely increased at all from the previous quarter (304 million, up from 302 million).

“We do not expect to see sustained, meaningful growth [in users] until we start to reach the mass market,” warned interim boss Jack Dorsey. “We expect that will take a considerable amount of time.” How reassuring.

With Twitter shares nearly down to the R332 price at its IPO in 2013, the firm’s now valued at less than R256-billion, making it a tempting takeover target for a hungry tech giant.

The natural choice of buyer would be Facebook. Mark Zuckerberg is determined to dominate social media, having already added WhatsApp and Instagram to his empire.

Alternatively, a rival like Google or Microsoft could use the acquisition of Twitter as a way to challenge Facebook’s supremacy. Twitter has far fewer dimensions as a platform than Facebook does, as well as far fewer users, but it’s different enough to be able to survive the competition, which is more than could be said for the ill-fated Google+.

Of course, these or the other big beasts with the pockets to buy Twitter may not in fact have the stomach for it. Perhaps there are better companies for them to invest their money in. But if Twitter’s share price doesn’t stop dropping, it could become too tempting to ignore. Everyone likes a bargain.

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