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Twitter rejects $500m Facebook offer

by Dan Leahul, Brand Republic 25-Nov-08, 09:20

LONDON - Talks have broken down in Facebook's bid to acquire Twitter in exchange for $500m (£330m) worth of stock after the two companies failed to agree on the stock's value.

Is Facebook right to walk away from takeover talks with Twitter? **Vote** and have your say.

Read Gordon's Republic blog post -- Facebook says no to Twitter

Facebook expressed interest in acquiring micro blogging site Twitter for a number of weeks, holding private meetings with the popular microblogging start-up in October, but negotiations finally broke down at the beginning of November.

The main stumbling block was the disagreement over the price of Facebook's stock.

Facebook was offering 3.33% of its stock valuing Twitter at $500m (£330m). This based the stock valuation on the price Microsoft paid when it purchased a 1.6% stake in the social networking site for $240m (£160m) in October 2007.

That price, when Facebook was in full stride in a stabilised economic climate, valued the company at $15bn (£10bn).

Twitter investors and management saw that figure as inflated and valued the shares at a lower level, putting Facebook's value in the $5bn (£3bn) range.

This is in keeping with the way net stocks have plummeted in recent months, with Google dropping 61%.

That would have seen the deal give Twitter a value of $150m (£100m), which was seen as too low.

Biz Stone, co-founder of Twitter said that the company wanted to remain independent to expand on its messaging service and try their hands at building a functioning revenue model.

Twitter, with over 6m registered users compared to Facebook's 120m, has yet to develop a way to generate significant revenues, which is seen as one of its main stumbling blocks for growth.

However, the company is one of the fastest growing Web 2.0 platforms, with registration numbers growing 600% over the past 12 months.

Comments

Sophie - 25/11/2008

Twitter should remain independant. Facebook will just get far too boring if it has all the power... the nice thing about Twitter is that it's not Facebook!

James Stewart - 25/11/2008

Twitter is going to regret that in a year or 2 when the next fad comes along...

g - 25/11/2008

I'd have taken my cut of the £100m, bought an island and retired. Much more fun than working out a functioning revenue model

Karen Clark - 25/11/2008

Twitter will be initially disappointed but FB will be more so in years to come

rob wingrove - 25/11/2008

I think Twitter is going to regret that. Status updates on Facebook accomplish essentially the same service as Twitter and with a few tweaks on Facebook their status update service could achieve the identical service that Twitter offers. I was surprised that Facebook even tendered an offer and more so that Twitter rejected it. Its the sign of the strange economy that the internet has created where a company with no revenue model is offered to be bought for £330m and the offer is rejected.

Greg Beazley - 29/11/2008

I'd like to see Twitter stay independent, but Rob Wingrove makes a good point. It is surprising that Facebook doesn't ust invest their bid into their own Twitter-like service into their existing status update platform. Im sure $500million would be enough to build such a thing. Hey, give me the money and I'll build it! Give it another year and Im Facebook will monopolise.

Bill Eater - 30/11/2008

Oh boy. Somebody is going to be kicking themselves later.

Remember Jerry Yang rejecting the Microsoft $44 billion USD bid for Yahoo ?

Yahoo has since dropped in value 60%.

Twitter has peaked in value. All they have is brand, as the technology can be recreated by anyone.

NEIL COWAN - 01/12/2008

Yeah, the Mumbai terrorist attacks seems to have given Twitter some much needed public legitimacy rather than its being perceived as just a lightweight blog on the hoof. Twitter has a probable shelf life or maybe two more years. Turning down Facebook on the basis that its shares were valued pre-global meltdown, and therefore the swap undervalued Twitter, is rich coming from a company bereft of a viable business model. Twits!