Who is going to buy Twitter?
That’s the $18 billion question Silicon Valley has been asking itself for over a year since it became apparent Twitter wasn’t growing the way investors once hoped.
In that time, the list of suggested suitors has grown steadily: Google is always a popular option, and others like News Corp, Silver Lake, activist Carl Icahn and venture capitalist Marc Andreessen have been tossed around, too.
Last week, well-known Twitter investors Steve Ballmer, the former Microsoft CEO who owns the Los Angeles Clippers, and Saudi Prince Alwaleed Bin Talal joined the list, a combination that was really interesting since together they own roughly 9 percent of the company.
And it shouldn’t come as a surprise if hedge funds or private equity firms start sniffing around, too.
Which got us thinking: Who are the other key players with either the influence or ownership necessary to make or break a potential Twitter deal? The list, it turns out, isn’t long.
Despite Twitter’s single-class stock structure, which means anyone with a big enough checkbook could theoretically come in and buy up the lot, a takeover won’t be as easy as dropping a few dozen billions.
A takeout price for Twitter will require some kind of premium to its $13 billion market value, even for a slow-growing company that loses money.
LinkedIn, which had also seen a slowdown in growth and is not profitable, was recently acquired by Microsoft for $26.2 billion, or about 33 times its yearly operating profit (Ebitda, for you balance sheet geeks).
If you apply the same multiple to Twitter, you’re looking at a takeout price of a little over $18 billion, or a 38 percent premium to its latest trading price of $19.04.
Add on the fact that much of the board is new, with little financial stake in the company. It’s possible they are loyal to CEO Jack Dorsey, who essentially appointed them, and don’t have the financial incentive to push change the way older, more frustrated investors might.
To be sure, a board director’s duty is to the shareholders and not the CEO, but that’s always a hard one to parse when, again, most of the board was nominated by the CEO.
Any interested buyer will likely need help from those who do have financial incentive — the folks in the chart above who can either apply pressure on board members or make a bunch of noise in public, like investor Chris Sacca did around the time former CEO Dick Costolo left last summer.
A few things to note about the list.
- Ev Williams seems to be the most important piece of this puzzle. As a company co-founder who’s also the biggest individual shareholder, it’s likely any takeover bid would require his agreement. He’s also the only other board member with experience running Twitter, which he might want to do again someday (although it didn’t go very well last time).
- Board member Peter Fenton and his VC firm Benchmark have a much smaller stake in Twitter than they did one year ago — almost 80 percent fewer shares, to be precise. But while Fenton doesn’t own as much as he used to, he’s still on the board, which gives him more influence than most outsiders.
- Most of these numbers are from SEC filings, but Ballmer’s stake is estimated. He said publicly in October that he owned 4 percent of the company, so we calculated his total shares based on the number of shares outstanding at the time. It’s possible he has purchased or sold shares since then, but we don’t know for certain. Ballmer declined to comment on his ownership stake through a Clippers spokesperson.
The idea of a takeover, be-it hostile or not, is still floating around because many investors still want it to happen. (Hence the stock jump.) Twitter’s user base isn’t growing, and now its business isn’t growing the way Wall Street likes, either. Every three months, the company delivers disappointing earnings that put a big, fat rain cloud over any positive progress it’s making toward a turnaround.
Bringing the company private, or hiding it behind some other acquirer, certainly looks appealing to those who believe Twitter just needs time.
So who is going to buy Twitter? You can expect the list will keep growing.
This article originally appeared on Recode.net.