Twitter Inc. jumped the most in more than two months after Microsoft Corp.'s $26.2-billion (U.S.) agreement to buy LinkedIn Corp. prompted speculation other technology companies may become acquisition targets.
Twitter's stock closed up 3.8 per cent to $14.55 (U.S.) in New York on Monday, after rising as much as 9.1 per cent – the biggest intraday jump since April 4. The social network's stock had dropped 39 per cent this year through Friday as investors questioned whether the struggling company can broaden its appeal to people who don't already use the service.
LinkedIn had fallen this year, too, on similar investor concerns that its pace of growth was slowing. Microsoft is paying a 50 per cent premium for the business-focused social network. The deal gives the market a sense of what larger, older technology companies may be willing to pay for younger ones like Twitter or Yelp Inc., James Cakmak, an analyst at Monness Crespi Hardt & Co., said in an interview.
"It definitely puts these companies more into play now because what we're seeing is concrete evidence of how important data, users and owning a component of time spent are," Mr. Cakmak said. "I would rank Twitter near or at the top of that list."
Theoretically, Alphabet Inc. would be the most obvious acquirer of Twitter, Mr. Cakmak said.
Social networks like LinkedIn, Twitter and Yelp have grown massive communities of people who use the websites to connect with professional contacts, friends and businesses. As the rapid pace of growth slows at these companies and questions linger about their ability to improve profitability, their valuations have come down.
Analysts at Goldman Sachs Group said in a note last week that the market for mergers and acquisitions was "healthier than headline volumes suggest."
In a note written before Monday morning's big deal, Goldman analysts led by Jessica Binder added LinkedIn, T-Mobile U.S. Inc., TripAdvisor Inc. and Twitter to the bank's proprietary basket of companies that it believes have at least a 15-per-cent chance of seeing "strategic" M&A action in the next 12 months.
Etsy Inc. gained as much as 2.8 per cent to $9.70 while GoDaddy Inc. jumped as much 4.2 per cent to $33. GrubHub Inc. gained as much as 3 per cent to $28.82.