- The recent speculation of a Twitter buyout seems based on an optimistic interpretation of Evan Williams' statement.
- Analysts don't seem to have a very optimistic view about the stock.
- Keep an eye on the news as Twitter's board is set to meet on 8 Sep.
Shares of San Francisco, California-based Twitter Inc (NYSE:TWTR) shot up last week as M&A speculation surfaced yet again. While a Twitter buyout cannot be ruled out, some analysts are already downplaying the possibility. What's more, it appears as if Twitter co-founder Evan Williams' recent statement has been rather optimistically interpreted as a buyout signal. Investors would do well to keep an eye on the news as Twitter's board is set to meet on 8 Sep. If no further news comes through, the downside risk could be significant.
Was Evan Williams' Statement Misinterpreted?
Ever since Bloomberg's interview with Twitter co-founder Evan Williams became public, speculations of a Twitter buyout have resurfaced. Well, you can't really blame the markets given the headlines that were making the rounds:
- Twitter Stock Jumps After Co-Founder Says It Should Consider Selling
- Twitter Jumps After Co-Founder Says Company Has to Consider M&A
- Twitter must consider takeover options, says co-founder Evan Williams
- Twitter Shares Jump After Co-Founder Says Company Must 'Consider' Sale If Offered
While none of these headlines are inaccurate, if you heard the interview, you might have come away with the impression that Williams actually said no more than he absolutely had to.
Here's the question that was posed to him by Bloomberg's Emily Chang in the back drop of a 'lot of M&A', probably referring to Microsoft's acquisition of LinkedIn: "Do you see Twitter remaining an independent company?"
Evan Williams responded by saying: "No comment on that. We're in a strong position right now, I think, and you know as a board member, we have to consider the right options."
First, what Willams said is what any board member is likely to say in response to such a question. As a member of the board, you have to consider the "right options", and that right option could be either to approve or disapprove of a buyout offer. The statement doesn't necessarily mean that he or the board is in favor of a buyout.
Now also keep in mind that nearly every rally in the past few months has been triggered by buyout rumors. Buyout rumors and speculation seem to be the only factors capable of lifting this otherwise battered stock. In such a scenario, it's unlikely that a board member would come out openly and say that Twitter is not open to a buyout.
What Are The Analysts Saying?
While not too many analysts have shared their opinions specifically about the latest round of buyout speculations, SunTrust Robinson Humphrey's Robert Peck doesn't think an acquisition is imminent.
Nearly a week after the stock shot up on the back of renewed buyout speculation, analysts don't seem to have a very optimistic view about the stock. Analysts still have a consensus price target of under $17 a share, representing downside potential of over 13% from Twitter's current stock price of $19.55.
So, if this speculation dies down without any confirmatory news of an imminent buyout, the stock could very well move back down. And, this won't be surprising given the amount of recent M&A speculation that has surrounded Twitter's stock. Here's a long list of rumors that have done the rounds in 2016 alone.
Summing It Up
Twitter shares have shot up by over 6% since Evan Williams' recent interview sparked off a fresh round of M&A speculation surrounding Twitter. While a buyout can't be ruled out, Twitter co-founder Evan Williams' recent statement regarding the board's willingness to consider the "right options" seems to have been wrongly interpreted as its eagerness to consider buyout offers. This is not the first round of M&A speculation surrounding Twitter, and it's unlikely to be the last.
Even as one analyst has opined that a buyout is not imminent, analysts have a consensus price target of $16.93 for the stock, indicating a significant downside risk. Twitter's board is expected to meet on 8 Sep, and if this M&A speculation dies down without any confirmatory announcements in the coming days, Twitter shares could move back down.