On Thursday, Shebly Seyrafi, an analyst from FBN Securities stated in a note to the clients that Facebook (FB) would love to make a bid for Snap Inc. provided shares drop to $14 per share.
Seyrafi wrote – “One of the key points that the bears on Snap may be missing is that we believe that Facebook would love to acquire the company, and could be willing to pay $20B+ ($14/share) for the asset.”
He restated in an email to the media that his stance is purely hypothetical and that there was nothing based on internal sources. He also cautioned in the note that co-founders Booby Murphy and Evan Spiegel may take up a decision against selling, even if the other investors feel that it could be the right path to go.
Murphy and Spiegel together have majority of the voting rights. Both of them had earlier snubbed an offer from Facebook a few years back – the offer was worth $3 billion.
In his report, Seyrafi had also cited reasons why the social media giant would still want to acquire Snap. He indicated the firm’s $22 billion purchase of WhatsApp, even though it was not generating significant revenue at that time. He also noted that FB has the balance sheet to achieve a huge acquisition. It had on hand almost 30 billion dollars in cash and investments by the end of the year 2016.
According to Seyrafi, Facebook acquiring Snapchat’s parent company would “eradicate one of the few long-terms threats to its business,” provided the dominance of Snapchat among the millenials and predicted evolution with older demographics. As of now, it has a strong presence among the age group of 12-24 years. It has been very innovative till now.
He wrote – “Several years ago, survey work showed that many teens were disengaging off of Facebook and moving over to Snap, and investors were quite concerned about the long-term ramifications of losing such a key age cohort.”
The FBN Securities’ analyst also pointed out Comcast as a prospective Snap suitor, referring to its NBCUniversal sector’s investment of 500 million dollars in Snap during the initial public offering.
Snap was given a sector ‘perform’ rating by FBN Securities and price target of $23. Snap is yet to get a buy rating from the analysts. Snap has mixed responses from the Wall Street.
On Wednesday, Snap’s shares were positive following the statement by Daivd Tepper, the billionaire hedge fund manager that he purchased Snap shares during the initial public offering last week.