The Wall Street Journal recently reported that Facebook and Google were circling Twitter with potential for an acquisition, which seemed viable after Google came out forthright with an aggressive $6-billion offer to buy leading group-buying site Groupon.
The WSJ noted, however, that the “financial multiples” don’t add up:
Executives at both Facebook Inc. and Google Inc., among other companies, have held low-level talks with those at Twitter Inc. in recent months to explore the prospect of an acquisition of the messaging service, according to people familiar with the matter. But what’s remarkable is the money that people familiar with the matter say frames the discussions with at least some potential suitors: an estimated valuation in the neighborhood of $8 billion to $10 billion.
This for a company that, people familiar with the matter said, had 2010 revenue of $45 million—but lost money as it spent on hiring and data centers—and estimates its revenue this year at between $100 million and $110 million.
Experts quoted in the article say that a $10 billion valuation isn’t “financially justified,” and readers agreed. In a poll asking them whether Twitter was worth $10 billion, more than 80 percent said “no.”
Well, now even Twitter’s CEO is saying as much. From TechCrunch:
Yesterday, Twitter CEO Dick Costolo dismissed the company’s $10 billion acquisition rumors during a speech at the Mobile World Congress in Barcelona. And today, Twitter co-founder and creative director Biz Stone told NPR that “We’re not valued at $10 billion dollars.”
I guess it goes to show that anybody can throw out high numbers, especially after Facebook reached a staggering $50-billion valuation.
Twitter’s most recent valuation remains at a comparatively paltry $3.7 billion dollars, which still isn’t bad for a company yet unable to profit.