Investments

Atwitter O’er Twitter

With the big announcement last week that Microsoft has snapped up LinkedIn, perhaps it was only a matter of time before the takeover talk started up in earnest about Twitter.

As social media services go, Twitter is the paradigmatic case that perfectly demonstrates the rule when it comes to social media and the inherent challenges in monetizing it. Twitter does not lack for eyeballs, interest or public awareness. At this point, tweeting may not be a thing that everyone does, but it is something that everyone is, more or less, up-to-date on the definition of.

But what Twitter has lacked of late is much in the way of investor confidence. After IPOing at $26 a share in 2013 and quickly spiking up to $74.73 in that same year, Twitter went on to watch its stock do some rather unfortunate bungie jumping in 2015 and 2016 and bottomed out somewhere in the $13 range.

While once forecasted to be the great Facebook-beater come to the market to change social media as we knew it, these days, that mantle has passed over to Slack, and Twitter, fairly or not, has been seen as a bit stuck in neutral. While Facebook built an incredibly complicated (and versatile) walled garden in an attempt to make it possible for its users to always be on Facebook, Twitter has not. Twitter, to an extent that is also unusual, has been the epicenter to a myriad of controversies regarding trolling — GamerGate most famously — an association that has left advertisers less than enamored. Also not wholly encouraging, the wholesale floppitude of buy buttons and the simple reality that, while consumers purchases are certainly influenced by what they see on Twitter, they aren’t on Twitter to make purchases.

And until very recently, the feedback for Twitter has been fairly blunt.

“The stock price is stuck in the mud,“ noted shareholder Keith Miller in a Q&A session with Twitter CEO Jack Dorsey. “Within the company, the ’geekdom’ is very happy and is very positive, but out here in the marketplace, everybody else is saying it’s too hard to use.”

CBS, in a recent commentary on why it might be time for Twitter to get itself under some new management, noted:

“Twitter’s management, led by Cofounder and CEO Jack Dorsey, lacks the forcefulness, vision and innovative muster that Facebook leader Mark Zuckerberg and his team clearly have.”

Ouch.

But if the words have gotten harsh, the stock market has gotten a bit more giving. After spending all of May and most of June below $15 a share, Twitter’s price, as of June 13, began something of a rally and jumped around 25 percent to a little over $16 a share. That is still far below the $35 a share Twitter was worth a year ago but at least in movement in the right direction away from the full-year low Twitter’s share price was facing as of a week and a half ago.

But Microsoft’s decision to snap up LinkedIn has set the market atwitter (we’re sorry; it won’t happen again), doubtlessly helped by that astonishing $26 billion price tag attached to the deal. Suddenly, Twitter is starting to look less like a social media platform that’s leveled at ~300 million users and can’t generate any real money and a lot more like someone’s (like with deep pockets and a less-than-robust concern with Twitter being cash flow positive) brilliant investment.

“We note Twitter’s global brands and reach, mobile penetration, healthy revenue growth and strong balance sheet, with $3.6 billion in cash and investments as of March,” said Scott Kessler, equity analyst at S&P Global Market Intelligence.

Moreover, noted Kessler, Twitter is not a fully optimized firm at this point, meaning the field remains open for “opportunities to grow user base, increase engagement and better monetize its offerings.”

The market doesn’t give the company enough credit, said Kessler, for its global brand and large platform, or its “history of success related to mobile, unique namesake offering combining broadcast capabilities and real-time communications.”

Plus, he notes, Periscope and Vine are both underfocused on, and that may well be a mistake, given the hard left toward real-time video streaming the market place has taken of late.

A trend, notably, that Twitter seems to have gotten on top of to the extent that it has announced changes to the Vine platform that now make 140-second video offerings available (as opposed to the standard six).

Plus, Twitter has data — an unfathomable amount of it — that tracks across a variety of devices, ages and ethnic groups. More than 500 million tweets are posted daily, according to S&P Global Market Intelligence. Which is likely why takeover speculation at present is centered on Google — a firm that certainly doesn’t need Twitter to make money via advertising but would awfully appreciate its massive cache of data and access to web users all over the world.

But this, of course, is predicated on the idea that Twitter will consider acquisition. The Street, while noting what a good target Twitter would make, also noted that, so far, Jack Dorsey has shown no signs of giving up the reigns at Twitter (or Square, the other massive public firm he is the CEO of).

“Twitter can be so much more than it is, but there is a remarkable failure of imagination and focus at the company,” noted CNBC’s Jim Cramer. “You simply can’t look at Twitter the way it is. You have to look at it as if it were professionally run by a full-time CEO.”

Again, ouch.

But then, Twitter will certainly go down in history as a company that miraculously managed to attract more sick burns than the millions it has made possible. Mark Zuckerberg, reportedly, in the last five or six years — famously, if perhaps apocryphally — said of Twitter:

“[Twitter is] such a mess. It’s as if they drove a clown car into a gold mine and fell in.”

Apparently, even Aaron Sorkin doesn’t write zingers for Mark Zuckerberg as well as Mark Zuckerberg does.

But whether that quote is something Zuckerberg ever said, the sentiment shows up a lot (as Jim Cramer proves), and it doesn’t change the fact that, whether one believes Twitter got into its gold mine by luck or skill, it is still the gold mine’s inhabitant, even if it is having a hard time figuring out how to extract the gold.

It will be interesting to see if it seeks help, and if so, whose help it will be.

 

Investments for the week 

In the wake of a few billion-dollar (and counting) weeks, it seems rather incongruous that our Investment Tracker would be set to disappoint with a week that came in at $841 million. Let’s hope that represents some sense of normal foundation, floor or some other sanguine sentiment that has private equity and venture capital firms looking to keep dry powder less dry.

This past week saw FinTech dominate again, reversing a blip in investment flow that saw B2B briefly dominate. The sector came in with 96 percent of the tally for the week.

This past week, the individual fund flows showed three triple-digit placements, with the largest one coming in China, which raises the question of how and when this region may garner additional interest in FinTech (and other) companies. The $235 million Series C investment in microloan company Fenqile shows commitment by Huasheng Capital, which is the local arm of Renaissance Capital, and trade press has reported that the funds will be used to expand reach economically, from blue-collar to white-collar consumers.

Resource Capital Funds spent $153 million last week in the Australian mining sector, with an eye on engineering and logistics, where mining services might be thought to weather a commodities swoon. The data center monitoring enterprise LogicMonitor said last week that it had raised $130 million via private equity financing through Providence Strategic Growth, with a focus on the cloud.

And in a glimmer of hope in the online lending space, the payoff for Payoff has been a decent one as of late, with $46 million raised in part from Eaglewood Capital Management. The other end of the “top 10 stack” shows the $20 million that was raised in an effort to reach to India’s SMBs, for IntelleGrow, where existing investor Omidyar added backing to its previous funding. One wonders if the recent movement by India’s government to open the door to more direct foreign investment may find some further movement of funds into that country’s startups and fast-growing tech firms.

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