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Twitter Should Return Its $3 Billion to Shareholders
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Despite its failure as a company and its disastrous business model, one positive thing Twitter Inc. (NYSE: TWTR) could do is return its $3 billion in cash and short-term investments to shareholders.
Twitter does not need the money. Its second-quarter EBITDA was a healthy $175 million, up 45% from the same period a year ago. Revenue continues to rise, albeit slowly, up 20% in its most recently announced quarter to $602 million.
Twitter will continue to grow, but not enough for Wall Street, which is another reason a cash dividend or share buyback would be a gift to shareholders. Its third-quarter forecast was weak, but not disastrous, another sign it does not need its cash.
The forecast:
For Q3, we expect:
• Revenue to be in the range of $590 to $610 million;
• Adjusted EBITDA to be in the range of $135 to $150 million;
• Stock-based compensation expense to be in the range of $165 to $175
million;
• GAAP share count to be in the range of 705 to 710 million shares;
• Non-GAAP share count to be in the range of 715 to 725 million shares
For the year, its capital expenditures are expected to $300 million to $325 million, which it can get via net cash provided from operating activity or debt.
The cash distribution would be a partial reward for shareholders who have watched Twitter’s share price fall 50% in the past year, as well as 10% after the announcement of its results. Twitter’s market cap is only $12 billion. That makes $3 billion more than a modest sum.
Based on current sentiment of analysts and shareholders, Twitter’s new initiatives will not be better than its old ones. Marketers don’t see it as a good platform. Its foray into video has not impressed anyone. If Twitter has any future at all, it is as a bit player in social media that will have a flat user base and very modest revenue growth — maybe as low as 10% per year.
Twitter can throw the dog a bone via stripping its balance sheet of cash, and it should.
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