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Twitter Inc. (NYSE:TWTR) Banks a Win With SoundCloud

Twitter Inc. (NYSE:TWTR) Banks a Win

Date Published: 2016-09-28

Written by Ophir Gottlieb

Preface
The Financial Times has reported that Spotify is in "advanced talks" to purchase SoundCloud, and that could mean a nice win for Twitter Inc. (NYSE:TWTR).

STORY
Alex Heith of Business Insider tipped us off to this story. Twitter Inc. (NYSE:TWTR) made a $70 million investment in SoundCloud for what, at the time, was a 10% stake in the music company. News has broken that SoundCloud may be acquired by Spotify. Here's a snippet from BI:

"
On Wednesday The Financial Times reported that Spotify is in "advanced talks" to acquire SoundCloud for an undisclosed sum.

The immediate impact for Twitter Inc. would be pretty simple -- a cash in flux to the bank. Should the SoundCloud sale go through for cash, Twitter Inc. (NYSE:TWTR) will get its $70 million back and whatever gains it has made on the investment. While that does sound like good news, we have another take.

It's the secret in plain sight, but Twitter Inc. has a mountain of cash -- $3.6 billion (after debt, it has $2.1 billion in net cash). While more cash in sounds good, we are left to wonder what else Twitter Inc. is going to do with it.

Since the firm doesn't seem particularly interested in a high visibility (and likely costly) marketing campaign for the NFL, we don't really see a clear path for using the cash on hand, and it looks more is about to drop in.

With the rumor mill spinning at full throttle for a Twitter takeover, perhaps everyone, Twitter Inc. included, is just waiting to see what happens with that ordeal before plunging its cash hoard into good use. For now, Twitter Inc. (NYSE:TWTR) appears to be getting yet more of the thing it doesn’t really need more of.

The author is long shares of Twitter Inc. (NYSE:TWTR).

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