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The Risks Of Buying Twitter Inc Stock On Buyout Rumors

  • Twitter Inc shares have rallied 10% following rumors of a buyout by Steve Ballmer and the Saudi Prince.
  • The rewards of buying into the rumor could be significant, but the risks aren't negligible either.
  • Should you buy Twitter stock now?

San Francisco, California-based Twitter Inc (NYSE:TWTR) shares have jumped by over 10% in the last two days, on the back of yet another round of buyout rumors. This time around, rumors have it that ex-CEO of Microsoft, Steve Ballmer, and Saudi Prince Alwaleed bin Talal could be looking to take the microblogging giant private. What’s possibly adding credibility to the rumors is the fact that both Ballmer and the Saudi Prince already own a sizeable stake in the languishing social media company. For investors, the rewards of buying into such a rumor could be significant, but the risks aren’t negligible either.

What’s Cooking? Twitter’s Latest Buyout Rumor

Twitter shares ran up 7.25% on Wednesday when rumors of a potential buyout began doing the rounds, followed by a 2.95% gain on Thursday. This isn’t the first time a buyout rumor has lifted the stock, and it probably won’t be the last. What’s possibly got everybody excited is that both Ballmer and the Saudi Prince already hold sizeable stakes in Twitter.

Prince Alwaleed’s first investment in Twitter dates back to 2011, before the company went public, when he invested $300 million in the microblogging platform. He later doubled his investment in Twitter, in early October 2015, following which, Prince Alwaleed and his investment company Kingdom Holding Company owned a combined stake of about 5% in the company with a combined ownership of nearly 35 million shares.

Likewise, Steve Ballmer also announced (on Twitter) his ownership of a 4% stake in Twitter...