Exclusive: Salesforce's Largest Holder Does Not Want Company To Buy Twitter
Twitter Inc (NYSE: TWTR) rose more than 4 percent Wednesday morning after The Wall Street Journal suggested salesforce.com, inc. (NASDAQ: CRM) CEO Marc Benioff is very interested in acquiring the social media company.
According to the report, Benioff described Twitter as an "unpolished jewel and a "great brand." The executive believes there is tons of untapped potential in Twitter's business. The report also stated that Benioff has been building a case for Salesforce's investors and other key members as to why it should acquire Twitter.
However, sources familiar with the matter told Benzinga Pro Wednesday morning that Salesforce's largest holder, Fidelity Management, said it wouldn't be happy if Salesforce was to purchase Twitter.
Fidelity believes that such a deal is not in the best interest of shareholders, according to the sources.
4 Key Facts To Consider
Bob Peck of SunTrust Robinson Humphrey offered his take on WSJ report. In his research report, Peck noted:
- An acquisition of Twitter by Salesforce would come at a size that's more than seven times greater its prior largest acquisition to date and would "warrant significant investor support."
- Twitter's profile data, relative to its other social media peers, are largely unverified and less complete as they lack sex and age information.
- Twitter says it has over 320 million monthly active users on its platform but there are several unknowns, such as how many of these are fake and bots, the materiality of size in the US, trends in engagement levels of users.
- It's not clear what represents a fair premium for any sale. A $26 takeout price represents its IPO price and >6x forward sales and >22x forward EBITA. Peck suggested the stock "largely accounts for the take out premium" at current levels.
Bottom line, Peck stated that the "underperforming fundamentals and potential of a failed sales process create too much downside risk."
Shares remain Neutral rated with an unchanged $18 price target.
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