| A few critical mistakes here. First, you have to distinguish between operating and non-operating assets. The $4B you cite is the book value, which most certainly includes operating assets. If you are adding operating assets to your valuation, then you are basically assuming that you are selling these and not using them to generate revenue. You can only do one or the other. You can add cash (non-operating asset) to your DCF, but you (may) have to remove debt also, depending on what kind of cash-flow you are using. The bigger issue is that you cannot use revenue for a discounted cash-flow. Twitter has significantly negative free cash flows (unless you don't count stock based compensation, a huge number), so you have to start making some serious assumptions about cost-cutting to get it positive to get a positive enterprise value. Even assuming they can swing it around to positive $100M FCF (after reinvestment needs), that's $1B (using your 10% discount), add in $2B (we'll assume that the $100M figure includes interest payments, so we will not subtract debt), that only gives $3B, and that's with hefty assumptions of cutting costs. |