May 12, 2014

Whats the future of Facebook Whatsapp merger

Both the AOL-Time Warner and Facebook-WhatsApp mergers predominantly used stock; both mergers were heralded as being transformational.

One merger bombed; the other one will as well.

In the fullness of time, probably sooner than later, the WhatsApp deal will likely yield a $19 billion write-off, mimicking the ill-fated AOL-Time Warner deal.

I use WhatsApp's product/service. It is an instant message chat room, literally nothing more and nothing less. I am not certain, but I believe WhatsApp has no revenue. 

There is always a fine line between insanity and brilliance. In the final analysis, that's what's up with WhatsApp -- it's insanity cubed.

From my perch, I would declare this deal as dead at birth. The transaction stepped over that line and gave fuel to the final bubble-like move in the market leaders early in 2014.

Just as I successfully avoided and shorted AOL on the announcement of the Time Warner merger, I have no interest in ever investing in Facebook, the management of which gave birth to the ludicrous WhatsApp transaction.