KEY POINTS
- BENIOFF GOES LIVE AFTER ALL: CRM was the only potential suitor that we were legitimately concerned with since the company was staying quiet while its stock was getting hammered on the TWTR rumors. However, Benioff finally broke the silence yesterday, and we suspect he was making a point to kill the rumor simply because he elaborated beyond the typical boilerplate dismissal that every public CEO is trained to say in these situations (i.e. “we do not comment on…”). We’re not suggesting that Benioff wasn’t interested, but that he now understands that his investor base can't stomach a TWTR takeover after seeing what the street did to CRM on just the rumor alone (down over 10% since the news broke). Note that GOOGL and DIS have supposedly bowed out as well (if they were ever legitimately interested to begin with).
- OVERPLAYED ITS HAND: TWTR is supposedly looking to finalize a deal before 3Q earnings, which seems not only hasty on their part, but also ambitious in terms of the possibility of closing an acquisition of its size in such a narrow window; especially since the drawdown in CRM over the past week serves as a wake-up call to any would-be acquirer considering moonlighting as a distressed PE investor. All things considered, TWTR is likely walking into 3Q results without a deal in place, which is a scary omen in itself since TWTR upped the ante by effectively putting a deadline on a take-out. If TWTR is still public by the 3Q print, it would effectively kill its own M&A prospects in the eyes of the street. Going back to our original thesis, if there is any whiff of potentially declining revenues in the near future off the 3Q print, we suspect TWTR will be on its own for a while. TWTR remains on our short bench while we vet the setup from here.
Let us know if you have any questions or would like to discuss in more detail.
