The following commentary was originally sent to Action Alerts PLUS subscribers on Jan. 20, 2016, at 3:26 p.m. ET. Click here to learn more about this actively traded portfolio.
Twitter (TWTR) shares spiked in afternoon trading amid renewed takeover speculation. While the stock has come back down to reality (trading roughly 5% higher at the time of this writing), we wanted to make subscribers aware of the chatter as the stock had climbed more than 12% higher at points early this afternoon.
The rumor of the day centers around speculation that News Corp. (NWSA) -- the mass media and information services company that distributes content such as the Wall Street Journal and Barron's -- has expressed interest in acquiring Twitter. Theories like these do not come as a surprise considering Twitter's meteoric decline from its highs. To put these rumors at bay, however, News Corp. management declined to comment on the speculation and dismissed building any stake in Twitter.
Much has been made about the immense, unlocked potential that the microblogging company harbors, and many believe that it could take the spark and expertise of a successful social media or news conglomerate to turn the struggling company around. Recall, there were reports in April 2015 that Alphabet (GOOGL) (formerly Google) and Facebook (FB) had considered acquiring Twitter in the past, but that no meaningful talks had taken place. Nothing incremental ever emerged from the reports, but the approximately 70% valuation compression since then certainly makes the case for being acquired more reasonable.
For now, it seems we can chalk this episode up to nothing more than pure speculation (though we would expect the taste to linger around the market for the time being). We will keep an eye on any developments and keep subscribers updated with the latest news.
