Header image

Will Elon Musk’s Twitter takeover spark more social media M&A?

Elon Musk’s proposed purchase of Twitter has raised the hackles of many, with the debate predictably falling along political lines. The left has decried the public town square being in the hands of a billionaire, while the right has championed Musk’s self-professed free speech ethos.

No matter which way you lean, the US$39.7 billion deal begs the question: Will other social media M&A follow Twitter’s lead? Tech stocks have taken a beating in recent months, which creates a buying opportunity for investors with a clear plan to improve these companies’ profitability.

Other platforms potentially in the crosshairs include Snap (stock price down close to 50% year-to-date) and Pinterest (down by around 42% over the same period). Pinterest was reportedly the subject of takeover interest last year, first from Microsoft and then PayPal, though nothing concrete materialized.

Shelling out 

Several social media properties have been the subject of recent SPAC acquisitions or are due to become publicly traded entities via blank check companies. Nextdoor, a network connecting neighbors, listed last year in a US$4.3 billion SPAC merger, while Florida-based video platform Rumble’s US$3.2 billion SPAC deal is yet to close.

Donald Trump’s proclaimed antidote to Big Tech’s “cancel culture”—Trump Media & Technology Group—is in the process of its own de-SPAC, with the US$1.7 billion transaction currently scheduled to close in Q3 2022.

If the sector continues to be pummeled in public markets, these could become take-private targets for investors looking to take a leaf out of Musk’s playbook by turning around companies’ fortunes away from the prying eyes of public markets.

Tweet and sour 

Much smaller platforms garnering attention include California-based Rallio, a social media service for franchises that was looking to sell a majority stake in January. Another is New York-based Sermo, a social media platform for physicians that expects to explore a sale or IPO in 2024.

Other privately-held Twitter alternatives also exist, including the conservative-leaning Parler, which raised US$20 million in January, and Gettr. Then there’s Counter.Social, where many of the liberal Twitterati say they will defect if Musk’s deal goes through.

But the main concern for any investor looking to buy a Twitter alternative is whether they will ever manage to scale in a meaningful way. Earlier this year, influential podcaster Joe Rogan joined Gettr after Twitter banned Republican Congresswoman Marjorie Taylor Greene’s account.

The move inspired one million new users to sign up to the conservative-friendly platform in less than a week. However, shortly thereafter Rogan called the platform a “fugazi,” pointing out that his circa nine million Gettr followers don’t exist, the figure is just ported over from Twitter.

“Gettr doesn’t even have nine million people, it’s a lot of f**kery,” he said at the time.

For all of Twitter’s faults in developing a sustainable business model, at least it has built the critical mass of interaction. Investors need to see those foundations, at the very least.