By Paul R. La Monica
(CNNMoney) – Thanks to an errant tweet from Twitter’s CFO Anthony Noto a few weeks ago, everyone knows that Twitter will buy a company. But maybe Twitter should consider selling itself rather than looking for more acquisitions?
Twitter has failed to live up to Wall Street’s expectations after a successful initial public offering in November 2013.
The stock fell nearly 45% this year, making it the worst performance yet on CNNMoney’s Tech 30 Index. The growth of Twitter users has not been strong enough to impress investors. And while there were profits, the revenue has been miniscule so far.
Meanwhile, the social media company Twitter is most often compared to; Facebook has a phenomenal year. The shares were up nearly 40%.
I love using Twitter. It might even be a bit addicted. But I’ve always viewed Twitter more as a niche service.
All my journalist friends are on Twitter. But most of my other friends and family use it sparingly… if they use it at all. However, everyone I know is on Facebook multiple times a day.
And in the world of online advertising, scale clearly matters.
It’s why Facebook, with a market value of $ 210 billion, is worth almost 10 times what Twitter is worth. And it’s why Google, which is worth nearly $ 360 billion, is eight times the size of Yahoo.
So would Twitter be better off as a subsidiary of a larger media or tech company rather than looking to grow by acquiring stuff? Maybe
Twitter has $ 3.6 billion in cash. That’s respectable, but it’s not that great spoils of war to merge.
The company’s ties were labeled junk by Standard & Poor’s last month. That could make it difficult for the business to grow by using debt to reach deals. And because its stock price has been in free fall, offering stocks to any potential target would likely be a tough sell as well.
And Wall Street has also been concerned about a recent round of inside sales at the company, including sales by co-founders Evan Williams and Jack Dorsey as well as CEO Dick Costolo, in recent weeks.
But none of the sales were that great. And a Twitter spokesperson added that “in addition to altruistic donations, all executive stock sales were made in accordance with automated trading plans put on file at least 90 days prior to sales.”
Still, there seems to be a feeling that Twitter could be vulnerable if the stock market continues to slide.
One of my followers on Twitter, a person who calls himself @ FilmProfessor9 (naturally) wondered if the company might be a good fit for Rupert Murdoch. That would be fun. And people would immediately start wondering if Twitter was destined to become MySpace 2.0.
But I doubt Murdoch wants to spend more than $ 20 billion on Twitter, especially since the company would likely be a better fit for his smaller News Corp. business than the larger media conglomerate, Fox.
Still, Google and Facebook could easily buy Twitter. Also Alibaba. That would be quite an interesting combination that could hurt China’s Weibo a bit, which is a kind of Twitter.
And what about Apple? The most valuable company in the world has a huge amount of cash on its balance sheet. Adding Twitter to the portfolio could help the company diversify beyond hardware and software and make it more competitive against Google and Facebook in the online advertising race.
Mind you, this is all just idle speculation. There have been no rumors to suggest that Twitter is looking to sell itself or that any of those aforementioned companies snoop around.
But perhaps all it takes to put Twitter in the game is an activist shareholder or two wanting to buy a stake and thus generate buzz.
Carl Icahn is often mentioned as someone who might want to invest in Twitter to turn things around… although that rumor seems to be based almost entirely on the fact that Icahn is one of the most experienced Twitter users on Wall Street.
Ironically though, if the rumor came true, most people would probably find out from a tweet from @Carl_C_Icahn.