Facebook is not worth enough to buy Twitter

Facebook is not worth enough to buy twitter
After month of rumors Facebook Director and one of its largest investor, Peter Thiel, confirmed for the first time that Facebook and Twitter had been in talks with each other but the deal failed because of disagreement over how much Facebook is worth, he spoked in an interview with Business Week.


Biz Stone, the co-founder of Twitter Inc. confirmed that Facebook had looked to buy Twitter last fall. Biz Stone said in his email to computerworld, “We’re big fans of Mark Zuckerberg and his team, but we feel very strongly that Twitter is just getting started. We’re planning on building a strong, independent Twitter Inc.”

Twitter has grown significantly from 800,000 unique users last year to over 6 million at present.

When Facebook suggested a sum of $500 million to buy Twitter, it was obvious that they would have to pay in Facebook stock. The point in question was how much Facebook stock was worth. Since Facebook is a private company, its shares are not listed on the stock market.

In 2007, values ranged between $3.7 billion to $15 billion. According to sources, while Facebook claimed that their stock was worth between $8 billion and $9 billion, Twitter claimed that Facebook was worth only $2-4 billion. This was the main reason why the discussions fell apart.

Caroline Dangson, an analyst at IDC, said there would have to be great debate over Facebook’s stock price, since it’s a highly popular but private company that hasn’t yet shown whether it can generate significant revenue.

“People are just fascinated that companies like Facebook and Twitter have done so much to transform Web 2.0, yet they haven’t made the revenue to transform their success,” she added. “There’s a lot of debate about value in these sites. They’re doing so much but not generating the revenue people expect.”

Peter Thiel added that Facebook stock “is worth more than people think it is”. They also remain open to the possibility of acquiring other companies.

Facebook and Twitter still continue to have talks with each other but there are no serious acquisition considerations at present.