Will SNAP be Acquired?
More than 3 years ago, Facebook attempted to buy Snap Inc. for around $3bn. Snap rejected, IPO'ed and at some point reached a market cap of $30+bn.
As of right now, Snap's market cap is around $8bn and its stock trading near all-time lows.
Do you think Facebook would eventually be interested in acquiring it if it gets cheap enough?
Honestly buying SNAP at this point reminds me of News Corp buying Myspace. It's like catching a falling knife at this point. Yes, they could be acquired, but FB seems more interested in killing them off with Instagram Stories, so don't think they'd be the buyer. MSFT maybe? And, if so, at what price? I think it still has downside. Company isn't profitable (durr but future growth--what growth, it's losing users) and reality is finally setting in on all the craptastic tech.
You do bring up strong arguments and I think the only reason one would consider investing in SNAP is if he/she anticipates FB would want to buy it. But from the look of it right now, it seems like FB is going to take all of Snapchat's features and implement them into its apps. Will be interesting to see what will happen to Snap in the near future.
I think a lot of where the market is valuing the stock lies within the company's ability to grow users and run ads. User growth declines, ad revenue decline, stock takes a hit, right? Facebook will not try to acquire the company not matter how cheap because they are effectively killing the company off themselves. They wouldn't spend money for a business they can take down themselves.
Personally, I see potential value in other aspects of SNAP. For example, their facial recognition technology (all those face filter things they have) could be seen as a synergy for prospective buyer who doesn't have the means to develop it themselves internally. Now lets look at this from the prospective buyers standpoint. Why acquire SNAP right now? Assuming its a cash deal, why not wait for that stock to drop lower and lower, ultimately making the purchase price with the premium crazy cheap.
It's a stock I've considered taking a small position in. The downside is I lose my investment, which would suck, but the upside is they figure it out, get acquired, or maybe even get taken private and a small position pays off big time. Would love to hear some others thoughts though.
I like the idea of buying it if gets even cheaper. Thought about doing a similar strategy back when TWTR was in the low-teens. It didn't end up being acquired but the rumors about it possibly being acquired was enough to send its stock through the roof.
A company like that won’t get a big premium for a takeover/private... but let’s say you buy it now, it goes down another 20% and then gets taken over or private for a 30% premium. What would be the return? Is it a good bet, considering that the company per se is going nowhere? I don’t think so. If you want to bet on a potential takeover target, you’ll be better to find a good company, where your worst case scenario (no take over) is that the business keeps growing at a moderate pace and the stock holds its value...
a ~4% return?
Yes, that says the math. In essence is all about the delta between the drop you incur in while waiting for the takeover premium.
If you follow this line of reasoning, you need your premium outpaces your drop by 5% to avoid losses, 11% to get a 5% return and 18% to get a 10% return (which is something I would target here). Starting from a typical 30% premium, it means that the maximum drop you can bear is 12,5% (7,5% in case of a 25% premium).
To my eyes, it looks a rather long shot to make it a good place to put my hard-earned money.
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