Remember last summer, when struggling Twitter was going to sell to Google? Or Facebook, or Alibaba, or Apple?
Thanks in large part to the appointment of co-founder Jack Dorsey as permanent CEO, which appeared to assuage some of the worry around the social communications company, it looked as though those largely baseless Wall Street rumblings were a thing of the past.
Well, that was a short honeymoon.
With Twitter stock trading near its all-time low and market value that is less than half of what it was a year ago, questionably sourced rumors that News Corp was interested in buying the company sent the stock soaring for a hot minute Wednesday afternoon.
As it turns out, News Corp wasn’t actually interested, and Twitter’s stock slowly came back to earth.
But the instantaneous reaction by investors does reveal a few important things about the mood that continues to pervade the company.
First, there is the idea that Twitter might be better off as part of another corporation, which still sounds like great news right now to many Twitter investors desperately looking for something positive to grab on to.
Second, given Twitter’s rock-bottom stock price and its tetchy shareholders, activist investors are likely to look at Twitter with renewed interest. The company doesn’t currently offer preferred shares, which means anyone with enough cash could theoretically come in and start causing a ruckus. And there are also the risk-arbitrage traders who are always looking to capitalize on stock moves caused by takeover events, rumored or otherwise.
SunTrust analyst Robert Peck says this scenario isn’t off the table, given Twitter’s current position.
“When you have a struggling asset like this, where is the activist shareholder?” he said in an interview. “Is that something that pops up out of nowhere, where we find out [an activist shareholder] all of a sudden has acquired a 5 percent position and is rattling the cages a little bit more? That could be a catalyst for change.”
Still, there are a number of arguments for why Twitter’s board would reject a would-be suitor.
Most obviously, it has a relatively new CEO in Dorsey, who has been running Twitter half-time/full-time — depending on how you look at his other job as CEO of Square — for about four months now. It’s unlikely that the board of Twitter would deny him time to turn the company around.
Dorsey has started with the recent launch of its new Moments feature, the hyped live-events product the company believes can spur user growth. And it hasn’t yet launched in most countries outside the U.S.
Perhaps most importantly, Twitter is finally starting to advertise to people who see tweets but don’t have Twitter accounts, a strategy it has discussed openly for years but just started to deploy before the New Year.
If these efforts work, Twitter could find its way back to growth.
Still, one has to speculate on what a takeover might look like. Twitter’s stock popped as much as 12 percent on the possibility of an acquisition, so any real bid would have to come in at least double, or at a 25 percent to 30 percent premium, to make it attractive to current shareholders. Given Twitter’s net cash of about $2 billion on the balance sheet, the sticker price would then effectively drop to about $13 billion.
Given Twitter’s lack of profit, most think only a strategic buyer would make sense, since no one’s going to milk it for cash or dividends. A Google or a Facebook, or even a major TV company, could come in and put a bear-hug bid on what is still a prized digital asset. Twitter has more than 300 million monthly active users as well as a growing ad business. It also has ad technology like MoPub and consumer apps like Periscope and Vine. A strategic suitor could find ways to make those apps work better in its own system.
One more intriguing move that has been considered by the board to control the company’s destiny, according to sources, is to get a large Internet or media company to make a significant investment in Twitter. This could buy it much-needed time and some modicum of protection to allow its growth efforts to gain momentum.
It could also take what has become damaging scrutiny off of Twitter too. At least for a bit.
In any case, the next key milestone for Twitter will be its Q4 earnings call on Feb. 10. A good call and forecast for 2016 could squelch concerns. Another troubling performance, of course, could stoke the rumor fire even more.
“This is one of those quarters where it’s not really about the quarter,” said Peck. “It’s much more about the outlook.”
Additional reporting by Edmund Lee.
This article originally appeared on Recode.net.