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Comment by nikcub | Hacker News Reader

I don't see this deal happening. The board are going to want a premium on a price that is already inflated because of the speculation and I can't see Disney going to $25-30B nor Salesforce being able to construct a deal around stock

Salesforce: in exchange for ~50% of market cap would be adding $2B of Twitter revenue growing at ~5% to their $6B of revenue growing at 25%+

Disney: for 16% of their market cap Twitter's revenue is half of what Disney's top-line has been growing each year - and again not much growth

Can't see a case where either would unlock user or revenue growth

Not sure what is next for Twitter, but it looks like another year of plodding along trying different things.

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I can imagine this turning out the way the Yahoo! thing went down last time. They wanted too much everyone bowed out (MS as well) and now where are they? Firesale which may or may not go through.

With Goog and maybe Disney bowing out maybe other parties are waiting for a firesale to pick them up.

Are you referring to Microsoft's 2008 offer to acquire Yahoo? That offer amounted to $31 a share, YHOO today is trading at $43-44 a share.

>YHOO today is trading at $43-44 a share

What % of that is their core business that MS offered to buy?

Yes, for how much now, ~5B. And what are its prospects? It's only been downhill for Y! since then. Marissa did a decent job trying to salvage it after nearly half a dozen CEOs prior to her vacillated, but it just never got its bearing and I fear similar is the case for Twttr.

You have to be careful quoting offer prices. Microsoft's 2008 offer for YHOO today would be ~$46.80/share.

It is best to look at market cap to determine value - Microsoft's 2008 offer was $44.6B; Yahoo's current market cap is $41.65B.

The discrepancy from then to now comes from the number of shares outstanding. There are fewer outstanding YHOO shares today than there were in 2008.

Did you also adjust for inflation in there? If not, there's an additional ~10% that can be adjusted for. $44.6B in 2008 would be $49.84B in 2016 USD, an even wider gap.

But there are fewer shares because yahoo "returned" north of $10B to investors through share buybacks. Not exactly sure how that should be accounted for, but I think relevant to the calculation.

Indeed, for a long-term "buy & hold" investor, the share price is much more meaningful than market cap because of the buybacks.

Did that offer include the AliBaba stake?

The difference is that Yahoo actually made real money and had valuable assets other than its core offerings (Alibaba).

Twitter is just an overgrown, overfunded startup without an obvious path to revenue strong enough to support its operations and growth.

Twitter makes ~$2 billion in revenue. Their market cap and funding may not fit, but they're a pretty huge company.

Huge waste of money is more like it. Call me an old-fashioned businessman, but $2 billion in rev still sucks when the end result is a $500MM loss. Even at that scale, $500MM is no small gap to close, especially when your primary competitors are wildly superior and better platforms for your core business are emerging all of the time (snapchat, for instance).

Scaling up a weak business to epic heights doesn't magically make it a success for shareholders. Initial investors, sure.

I should add that when I said "overgrown startup," the implication wasn't that it's a small company. I'm saying that they've operated at a loss for all of their existence (like many SV startups) and never turned that around. Scaling while failing, and they hoped that another round of investment (IPO) would give them time to change that.

Two billion in revenue is a lot less impressive when you consider that they spent half a billion more than that in the process.

Generally, people like their businesses to reliably turn $1 into $2 over time, not turn $2.50 into $2 over and over.

Particularly if what you do with the other $0.50 is build something that's only valuable because of the group behavior of a few billion fickle users who will almost certainly desert you at some point in the future for something newer and shinier.

But nice work if you can get it in the meantime.

    Generally, people like their businesses to reliably turn $1 into $2 over time, not turn $2.50 into $2 over and over.

I genuinely laughed out loud that you qualified that with "generally." Some quality dry sarcasm if I've ever heard it.

> a few billion fickle users

If Twitter actually had a few billion users it would be pretty valuable. IIRC it has just a few hundred million.

Maybe the tax losses would be worth something, but I don't consider it likely someone to pay $15.2bn for Twitter. Heck, even $5bn is still a lot of money to pay for a business that's losing $500mm a year.

Could you fire two thirds of all the staff and make it profitable?

I think Twitter is hoping for a strategic acquisition, based not on financials but on a brand and a vision. I guess this is how their board values the company. Either a buyer would be as enthusiastic about the dream as they are, or they'll realize that the dream is worth a lot less.

Twitter revenue is growing at 20% y/y as of last quarter, not 5%.

This leaves them being worth ~$10 billion (revenue * (0.1 * growth + 1)) (or ~$18 billion if the 6.4x multiple LinkedIn got is used). It'll be mighty hilarious to see potential bidders grossly overpay for a company that's already steadily slowing/declining.

How exactly is $2B * (0.1 * 5% + 1) == $10B? I genuinely want to understand your valuation formula.

https://news.ycombinator.com/item?id=12651012

According to the poster, the growth rate is 20% not 5%. Either way, to ball park acquisition price, you can divide growth rate by 10, add 1, then multiply in yearly revenue ((growth% / 10 + 1) * revenue). You can also divide growth rate by 10, double it, then multiply in yearly revenue ((growth% / 10 * 2) * revenue). Those estimates assume profit margins of 30%, so if you want to have it all be a multiple of profit, then divide the multiple by 0.3, then multiply that into yearly profit ((growth% / 10 + 1) / .3 * profit --or-- growth% / 10 * 2 / .3 * profit).

I don't intuitively understand where that 0.1 comes from but otherwise it looks a lot like a formula for compounded growth of 5% a year that is missing an exponential term.

Was 20% - referring to future growth, based on guidance for upcoming quarter it is ~5%

This is, afterall, the problem that sparked all the acquisition talks

Underlying driver here is that users are migrating en masse to Facebook now for their professional updates and post streams. Twitter is most impacted, but LinkedIn too. That's why TWTR selling, LNKD sold. The market for users attention, not just the market for their stocks is moving against them. FB is like the wandering Jupiter of our early solar system- the 'grand tack' is sweeping up the smaller bodies in the solar system. Good to be Jupiter..

Do you have a source for this?

I just use (or avoid using) facebook for totally different reasons than I use twitter.

On twitter I mostly communicate with people I've never met and have little association with apart from shared interests. It's a great way of meeting new people.

Facebook is for communicating with people I already know, many of who are actively searching for alternatives but because "everybody uses it" are locked in.

Interestingly, I've avoided using Facebook as much as possible. I keep the profile alive because my siblings expect me to have one and tag me in stupid things I don't allow to actually show up on my wall. I actually log in maybe once every six months because there's nothing to see there, just re-shares and tired memes. Twitter on the other hand I use pretty much daily.

I hope no one buys and Twitter collapses.

I use Twitter. I enjoy Twitter. Twitter does many good things for the world. But it's terrible in a million ways. I'm not sure that it's immediate collapse wouldn't be a net benefit for society.

Let Twitter die. Turn into ash. Let something new have a chance to grow and flourish.

I don't care much about this whole ordeal but your numbers are plain wrong.

FYI Twitter's revenue has basically doubled every year the last 5 years.

And how has profit followed along?

The poster said Twitter's revenue has grown 5%.

This is wrong. No matter how much you down vote me, no matter how much you want that to be right, that number is wrong. Look it up yourself.

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