Shares of Twitter (NYSE:TWTR) rose in midday trading on Monday, following reports that Walt Disney Company (NYSE:DIS) is discussing a potential Twitter takeover bid with an adviser.
In recent months, rumors that the social network will be sold has picked up. Twitter stock has gained 21 percent on Friday as several technology and media companies had shown interest in acquiring the company, including Salesforce.com (NYSE:CRM) and Alphabet's (NASDAQ:GOOGL) Google unit.
Twitter shares were previously down 4 percent, but turned positive after the report, with trading nearly double its 30 day average volume. On the other hand, Disney’s shares fell more than 1 percent after the news.
"As a matter of policy, we don't comment on rumors or speculation," Twitter stated.
The social network’s chief executive officer, Jack Dorsey, is a board member at Disney.
The deal is in early stages and it is not certain that anyone will end up buying Twitter shares. The negotiations have been prompted by Twitter’s sluggish growth in users and revenue, continual turnover among senior executives, as well as the lack of mission and business plan as centered as those of rivals such as Facebook (NASDAQ:FB).
Shares of Twitter climbed 3.3 percent to $23.37 on Monday, after surging on Friday when rumors of Salesforce’s interest surfaced. Meanwhile, Disney’s stock lost 1.4 percent to $91.96 a share on Monday.
The transaction would be the entertainment giant’s largest technology deal yet, after recent investments in Hulu and Vice.
Previous advancements by Twitter in streaming sports events online have drawn the attention of Disney Chief Executive Robert Iger. In August, the company said it was spending $1 billion for a 33 percent stake in BAMTech – a streaming-media firm established by Major League Baseball that Twitter is using to live stream different sports events.
Since Disney owns ESPN, the media company could consider Twitter’s sports-programming ventures as creating a potential competitor or it could be a technology partner that could benefit ESPN as cord-cutting becomes more popular.
Iger presented a positive assessment of the BAMTech-Twitter collaboration in a question-and-answer session at an investor conference held earlier this month.
“I thought Twitter actually did a very good job,” he commented, referring to one of the National Football League games that the site had hosted. “That platform was powered by BAMTech last week and will be, which I think says a lot about that platform because it was very stable.”
He also defined Twitter as a new entrant in the field of sports rights. “You have to think about monetization capabilities of these new entrants,” Iger said. “Nobody can monetize sports better than ESPN.”
Dorsey’s Role In Twitter
Twitter and Disney are also connected through the social network’s CEO Jack Dorsey, who has been part of the media company’s board since 2013. During an interview last year, Iger said that he occasionally gives advice to Dorsey regarding business matters. “I am not involved in his businesses, so I am a good sounding board for him,” he said.
The media giant has a mixed history in terms of acquiring technology companies, all of which have been smaller than Twitter.
In 2014, it spent $500 million as initial payment for Maker Studios – an online video producer famous among younger viewers seeking entertainment on YouTube. An additional $450 million was guaranteed if Maker met specific performance targets. However, Disney ended up paying only $175 million, according to the company’s filings with the Securities and Exchange Commission.
Some of Disney’s acquisitions were not well-timed. The company purchased the social-gaming company Playdom Inc. for a total of $563 million in 2010, not long before social games decreased in popularity.