Elon Musk has offered $43 billion to buy Twitter, a platform on which he has over 80 million followers.
My initial thoughts: Twitter the application is still an important social networking platform for breaking news and communicating with people. As an investment? It is a dumpster fire.
Twitter was one of the first stocks I have ever bought. The stock price I bought was under $20. My reasoning was that it is still a great product, and management would eventually have a plan to fix its stagnating user growth and inconsistent revenue growth. Most importantly, Donald Trump becoming the 45th President of the United States would send the stock soaring. He would end up sending almost 24,000 tweets as President.
Despite the attention Trump gave Twitter, it did not solve its lagging user growth issue. I ended up selling my shares of Twitter for around $38-40 and concluded the company was not a good long-term investment anymore.
My hypothesis on successful social networking sites is that they have a 5-10 year runway of max popularity and user growth. Each generation wants its own space, as it seems naive to think that those in their 20s will hang out on the same app as those in their 30s, 40s, 50s, etc. The principles of managing a networking site are not much different than running a big social club or gathering place. As the event organizer, it is your job to get as many people to attend and monetize each attendee. There is a ton of competition, so the organizer needs to keep attracting new people.
Twitter missed its best opportunity to generate revenue and users from 2010 to 2020. Facebook became a powerhouse through the network effect, and Twitter failed to capitalize when its window was open. Things like Tip Jar, Super Follows, and Ticketed Spaces were good ideas when Snapchat and Tiktok were not even a thing, but the landscape today in social networking is more competitive and challenging.
From an investment standpoint, Twitter is the Ben Simmons of stocks. Stephen A Smith has stated, “Ben Simmons is a jump shot away from being the second coming of Lebron James.” No matter how talented and good a player Simmons is, there is no reason to guard him if he refuses or is afraid to shoot 3-pointers. A starting guard in the NBA should make at least 100-200 3-point attempts in an entire season. Simmons, in his career, has only attempted 34 3-pointers his entire career! Simmons is a talented people player but does not attempt outside shots even when unguarded. Twitter is an influential company that many people know about but is not widely profitable or used.
Twitter is a conundrum whose best days are behind them. It is a rudderless ship. Who exactly runs them? The new CEO does not even own 1% of Twitter shares. They continuously fail, and I see only three options left:
Elon Musk buys Twitter and takes them private.
Twitter employees do not want him, the Twitter board does not want him, and the government will do everything to nix this deal. Making Twitter a pro-free speech platform sounds good from a constitutional theoretical perspective, but in reality, it is something that scares politicians. When you ask Americans broad questions like if freedom of speech should be protected or if people can express unpopular opinions, you have a consensus. When you ask more specific questions, like should people express anti-COVID-19 information or if Neo-Nazis should be allowed to march in a town with a majority Jewish population, you start getting polarization and divergence.
Twitter gets bought out by another company.
Meta and Google are dealing with their own antitrust issues, so adding Twitter would be a headache. The Federal Trade Commission approving Meta or Google acquiring Twitter is more likely than Elon Musk buying them. Disney, PayPal, Microsoft, Salesforce, Netflix, and Oracle, could all be potential buyers. This would be the best-case scenario for a tech giant or white knight to come in and take over. However, I doubt any company would want to pay more than the $43 billion Musk offered.
Remain a public company.
Twitter keeps the status quo, with little insider ownership and lofty goals likely never met. Sure, there is a lot of upside potential, but the problems in 2016 are the same today.
Twitter itself is one giant ecosystem. Compared with Meta Platforms, a more extensive ecosystem with other ecosystems interconnected. You can argue that Facebook is more dated than Twitter, but Facebook is just one facet of Meta Platforms. Look at Facebook as the Capital of Meta. You have Instagram, Whatsapp, and Oculus VR. These are the cities that make up a giant state in Meta. Here is the entire list of companies that Meta has acquired. While Facebook has grown where it is now only one aspect of Meta, Twitter is just…… Twitter.
When I was a Twitter shareholder, I had an underlining suspicion that management was incompetent and void of leadership. Twitter could have been a tech giant, but the company has languished. It is an aging platform with medium growth potential. Under the proper guidance, it could be a nice add on to a parent company (think when Louis Vuitton acquired Tiffany); however, its value has significantly declined since its prime.
Meta is not the most innovative or coolest tech company anymore; however, they are the most influential. They have billions of people in their sphere with a war chest of data and cash at their disposal. The leadership team at Meta operates at extremely high efficiency, which will likely lead to them becoming more profitable and bigger.
In 2017 they copied Snapchat Stories with Facebook and Instagram Stories. Reels is a copy and paste of TikTok. Before Reels, Meta launched Lasso, the original TikTok clone. This is what behemoth tech companies like Meta do. Encourage people to use its apps with new features and see what they like and dislike. They will experiment with making the app better until they kill their competition.
This is why Meta is a superior investment compared to Twitter. They are already aggressively focused on the future and have a giant customer pool at their disposal. The evolution of how we communicate via technology has evolved from text, photos, video, and eventually, the Metaverse.
Meta has many failed projects that never worked out, but like in investing, their big winners overcompensate for their many losers. Whatever their version of the Metaverse is, it will likely be big and profitable. Knowing the stock price (NASDAQ: FB) is down nearly 50% from its peak. Knowing this is not a very friendly environment with rising interest rates and supply chain issues. I see Meta as still being massively undervalued. At the same time, Twitter is stuck in a ditch, waiting for someone to save them from years of mismanagement.
Invest in Myself 