Twitter Falls 10% as Alphabet Reportedly Decides Against Bid

An image of a quarterly report on a screen
Credit: Shutterstock photo

Twitter Inc.TWTR plunged nearly 10% in the aftermarket session yesterday after a twist in its 'takeover' tale. Media reports indicate that Alphabet GOOGL may not be in the reckoning to acquire Twitter and hence may refrain from placing a bid.

Google's parent Alphabet was viewed as the most probable suitor owing to its diverse platform, which could have made the integration of Twitter easy. Plus, Alphabet could make a big splash in the social media circuit with a brand like Twitter. However, Alphabet is apparently not mulling a bid at all.

Even other contenders like Apple Inc. AAPL and The Walt Disney Company have also pulled out of the race as per a Recode report. Even Salesforce CRM is reportedly a little less interested now despite CEO Marc Benioff calling Twitter an "unpolished jewel" that has tremendous prospects in advertising, e-commerce, which bodes well for Salesforce's next stage of growth earlier on.

At Salesforce's Dreamforce conference yesterday, Benioff seemed to have moved away from his earlier stance. Media reports quoted Benioff saying "I think it's a great brand and I just wish Jack very well...good on his company, that's how I look at it today." The reason behind the reversal of his stance might be Salesforce's shareholders who have disapproved of the Twitter acquisition right from the beginning.

Twitter's acquisition will cost Salesforce upwards of $16 to $20 billion, which could dent its valuation, something that shareholders are wary of. Already, Salesforce, so far this year, has shelled out more than $4 billion for acquisitions.

Plus, Twitter will come with its own set of challenges for any buyer. Despite being a world renowned brand, Twitter is currently at crossroads. Yes, its valuable data (for a stagnant user base of 300 million plus users) can be leveraged by many tech giants but then profitability issues ($100 million plus in quarterly losses), a severely under monetized platform, and the infamous trolling can be too much to handle for any company.

Where Does this Leave Twitter Now?

A year into Jack Dorsey's return as the company's CEO, the stock has disappointed sorely. Shareholders are pushing for the company's sale, much to Dorsey's displeasure who apparently wants to remain independent. At last month's board meeting, Dorsey led Twitter bargained for more time for the "turnaround". Dorsey is trying hard to monetize the platform by adopting user friendly changes as well as going full throttle with "live", especially sports live streaming, to bring in users and advertisers.

But investors have lost patience and no one can blame them given the stock's abysmal trajectory and an ever elusive turnaround. Reportedly, the rumors of Salesforce bid moved Twitter to action. In September, Twitter hired Goldman Sachs Group and Allen & Co. to review prospective buyers. Twitter is planning to close negotiations for a possible sale before it reports its third quarter 2016 earnings on Oct 27. Reuters observes that the timeline for receiving bids as "hugely ambitious in the context of most mergers and acquisitions, given that Twitter began mulling a sale only last month."



Notably, the talks of a possible sale gave the stock a much needed boost, sending it up 27% in the past one month. With most of the expected contenders pulling out of the race, shares could drop considerably.

At present, Twitter carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Confidential from Zacks

Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

APPLE INC (AAPL): Free Stock Analysis Report

SALESFORCE.COM (CRM): Free Stock Analysis Report

ALPHABET INC-A (GOOGL): Free Stock Analysis Report

TWITTER INC (TWTR): Free Stock Analysis Report

To read this article on click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story


Other Topics


Latest Markets Videos


    Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at

    Learn More