Twitter’s Stock Soars On Weak M&A Chatter

Twitter’s Q3 Wasn’t A Disaster But What Did Management Talk About After?

The prospect of Twitter (NYSE: TWTR) being acquired by a larger internet or social media peer came crashing down earlier this month after a Recode report suggested that nearly every company that took a look at acquiring Twitter are now passing on the opportunity.

Yet Salesforce (NYSE:CRM) remained an interested player in acquiring Twitter and its name wasn’t fully taken out of the M&A picture.  However, leaked e-mails from Salesforce’s board member and former Secretary of State Colin Powell showed that Salesforce wasn’t even looking at Twitter in May – although it is possible that the prospect of an acquisition rose in the following months.

With no new recent updates it became clearer as each day passed that Twitter will continue, for the time being at least, as an independent company.  Investors hoping an acquirer would jump in and pay a hefty premium lost hope and Twitter’s stock slowly drifted back towards the $17 level which is where it was at before the M&A chatter first started.

On Friday a new rumor surfaced although there is little credibility behind the report that Japan-based Softbank is looking to acquire Twitter.

Japan’s Softbank is a major telecommunications and internet company with assets all across the world, including a stake in Sprint (NYSE: S).  The company hasn’t been a stranger to M&A chatter and it was heavily rumored that it was shopping around to buy Yahoo’s (NASDAQ: YHOO) assets.

The first question many investors are asking is the rumor of Softbank acquiring Twitter valid?

The answer is simple – no. CNBC’s David Faber was first to report of Twitter being in negotiation talks with Google and Microsoft (NASDAQ: MSFT).  Barron’s traced the source of Friday’s rumor to Flyonthewall which itself doesn’t report news rather cites chatter among traders without any attribution to a source.

The second question is a bit more complex.  Can Softbank afford to acquire Twitter?

Technically the Japanese multinational giant ranks as one of the 100 largest corporations in the world and coming up with the necessary financing shouldn’t be a problem.  However, the company completed a $31 billion acquisition of ARM Holdings in early September and borrowed one trillion yen ($9.63 billion) to help pay for the deal.  Investor appetite for further borrowing to acquire a social media company whose user base and financials have been well documented is a bit of a far stretch.

Bottom line, Softbank may or may not be interested in Twitter and other strategic buyer (or buyers) may or may not be interested as well.  This doesn’t sound very encouraging to Twitter’s shareholders but this is one of the few true statements that could be made at this time.