What If No One Bids for Twitter?

Two piece of news came out Thursday. One should encourage Twitter Inc. (NYSE: TWTR) shareholders. The other should bother them. Together, however, they may lead to the conclusion that there will be no reasonable offer, and Twitter will be left adrift without a business plan or partner to make its future viable.

First, Twitter many have run out of bidders.

Two Recode articles suggest that the count of potential bidders is dropping rapidly:

According to sources close to the situation, Google does not currently plan to make a bid for Twitter. While the search giant has been among the buyers considered most likely to be a contender for the social communications company, those familiar with the deal said that the company was not moving forward with an effort to buy it at this time.

In addition, several sources Recode has spoken to this week also said that Apple was unlikely to be one of the possible suitors, with one saying Twitter should have “low expectations” of getting an offer from the tech giant.

And from the other article:

Cross another potential Twitter buyer off the list: Disney isn’t pursuing a bid for the social platform, either.

Sources familiar with Disney, which was mulling a possible Twitter purchase last week, say the media giant has decided not to move forward.

That leads to the conclusion that the smart money does not believe Twitter is worth any more than its current valuation of $17 billion.

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These reports mean that the only probable bidder is Salesforce.com Inc. (NYSE: CRM), which was the first company rumored to have interest. However, investors have punished Salesforce’s shares because Twitter adds little or no value to the enterprise company’s core business. The punishment may not be over. According to MarketWatch:

If Salesforce were to buy Twitter, Mizuho analysts said they believe the acquisition would wipe out $12 billion to $17 billion of Salesforce’s combined value with Twitter, or 20% to 25% of the company.

The acquisition would hurt Salesforce, Mizuho analysts say, because they believe the company would have to increase cash compensation to make up for high levels of stock-option expense used by Twitter, and would not derive short-term value from the acquisition.

The second piece of bad news for investors is the pessimism that management has any capacity to turn Twitter’s fortunes around. This from The Wall Street Journal:

Twitter’s turnabout illustrates the cloud over Mr. Dorsey’s leadership of the company he co-founded. With a market value of about $17 billion, Twitter remains an enticing acquisition candidate to media and tech companies interested in valuable data and marketing opportunities created by its 313 million monthly users. But Mr. Dorsey’s (Jack Dorsey, Twitter’s CEO) efforts so far have failed to reignite flagging user and revenue growth, leaving the company vulnerable to a takeover.

That leaves investors in an extraordinary bind. There may be no buyers, and there may be no reason to think there is a strategy to pull Twitter out of a tailspin.

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