Bob Peck Thinks Twitter M&A Not Likely Until 2017, If Ever; Activists Will Find Challenges

On Thursday, CNBC reported that activists might be looking at Twitter Inc TWTR ahead of next Thursday’s board meeting. However, the media outlet was not alone in suggesting activist action.

On Wednesday, former chairman and CEO Ev Williams said on Bloomberg that the company needed to consider a takeover. "We’re in a strong position now, and as a board member we have to consider the right options,” he stated.

All of this led to a run-up in Twitter’s stock, and prompted some commentary from SunTrust’s Bob Peck.

Related Link: Twitter's Time May Be Running Out

As the analyst has repeatedly stated in the past, Twitter is seen by SunTrust as an unlikely takeover target because:

1. CEO Jack Dorsey returned to his position only a year ago.
2. They think the re-formed board supports Dorsey and would like to give his turnaround plans some time to prove successful.

As per the report, issued Thursday, activists may find an acquisition of Twitter quite challenging due to the important role of Dorsey in product innovation and user growth (the main problems at the time), the need to invest in product and marketing while not being able to cut costs, and the high stock valuation.

The Thesis Remains Unchanged

Peck’s report went on to explain why SunTrust analysts think Private Equity bids don't make much sense for Twitter, mainly citing financial reasons like the fact that employees would no longer receive stock compensation, leading to a more expensive deal, and the fact that such an acquisition would bring “no overlapping synergies to take out costs.”

Conversely, the analysts believe a “a strategic acquirer would make the most sense due to the leverage (technology, personnel) it could provide and the synergies to make it attractive.”

Having said all of this, SunTrust still remains confident in its belief that a takeover is unlikely, at least until next year.

SunTrust maintains a Neutral rating on shares of Twitter.

Full ratings data available on Benzinga Pro.

Disclosure: Javier Hasse holds no interest in any of the securities or entities mentioned above.