Jack Attack: Should Twitter Buy Square?

There’s no question that Twitter Inc TWTR and Square Inc SQ have been struggling to find their footing in the market. Twitter is down more than 16 percent in 2016, while Square is down about 8 percent. The S&P 500 is up 6 percent year-to-date.

Twitter has been the subject of takeover rumors for months, including yet another one on Wednesday morning.

Some traders believe dual Twitter and Square CEO Jack Dorsey should look to Elon Musk for inspiration.

Musk is both the CEO of Tesla Motors Inc TSLA and the chairman of SolarCity Corp SCTY and has spearheaded a bid for Tesla to acquire the struggling solar company.

In a recent Twitter conversation, @CalConfidence and @ndyGrosso discussed Dorsey making the same move with Twitter and Square.

“So who wants to bet that Dorsey pulls a Musk by having Twitter buy Square?” CalConfidence asked.

“It’s not ‘pulling a Musk,’ it’s the right thing to do,” Grosso replied.

Related Link: How A Tornado Changed One Trader's Mind About Twitter

He argued that Square’s financials are in better shape than Twitters’ and Twitter could use the potential revenue growth Square offers.

He added that Facebook Inc FB and Alphabet Inc GOOGL have been looking for new sources of revenue growth.

“FB and Google have been trying to monetize differently, 80-90% mobile ad rev is probably not sustainable.”

Grosso feels that Square offers a more sustainable path to revenue growth for Twitter than simply hoping to sell more ad space every quarter in perpetuity.

CalConfidence offered an alternative solution for Twitter, suggesting the platform charge $100-200/year for subscriptions. Grosso liked the idea, but said it wouldn’t necessarily need to be an alternative to a Square buyout.

“Do both! I do hope twtr signs exclusive deals w/ newspapers & adds a subscription, but sq has a wide net on small business…” Grosso concluded.

The idea of Dorsey following in Musk’s footsteps by combining his two companies may seem simplistic on the surface, but there seems to be plenty of compelling reasons for a possible deal between the two companies.