Twitter shares drop 15%; Is the microblogging platform ripe for a takeover?

By MoneyTimes

Aug 04, 2015 08:02 AM EDT

Twitter could be in the crosshairs of acquisition attempts from other technology companies should the microblogging stalwart fail to reverse the freefall its stock prices have caught in.

Business Insider reported that after Twitter announced that its stock prices had fallen 18 per cent to $31.01 a share at the close of trading sessions last Friday, the company could be a prime buyout target for companies looking to beef up their portfolio on the social network front.  

Historically, Twitter shares have never traded below the $30 mark since November 2013, when the company, at the verge of completing their IPO, went at $26 a share, and even then, its shares traded at a little higher than $45. However, analysts predict that the closer the company gets to breaching the low-water mark of 30 dollars a share, more companies are becoming interested to buy it out.

On the other hand, some analysts believe that Twitter needs to fall way beyond the critical point of $30 a share - somewhere near $24, perhaps, for a company to justify the costs of acquiring it. Eric Jackson of Ironfire Capital estimates that even at the magic number of 30 dollars a share, the market value of the company's outstanding shares plus an acquisition premium would place Twitter at a purchase price of about $30 billion -a hefty price tag, even for a company with very deep pockets like Google, Microsoft, or Apple.

The goings-on inside the company as well as its user base may play a deciding factor should Twitter's board approve the motion to sell.

Twitter's CEO Richard Costolo, director of product management Todd Jackson, and vice president of product management Christian Oestline had all jumped ship in July, and the platform barely posted any growth for the second quarter of the year, gaining only an additional of 2 million users on top of the previous quarter's 302 million registered users and falling short of the 310 million average monthly users projected by analysts.

Jack Dorsey, who replaced Costolo as interim CEO, acknowledged the shortcoming in a statement. "Our Q2 results show good progress in monetization, but we are not satisfied with our growth in audience."

Jackson sums up the issues nicely, saying "You can't trust any of the numbers," he said. "Twitter's value is predicated on users and user growth is stagnating -- how do we know what the users look like in two years?"

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