Twitter spent $150 million on an AI company but thinks the tech was really worth less than $13 million

Jack Dorsey AP ImagesTwitter CEO Jack Dorsey

Twitter is joining rivals Facebook, Google and Microsoft in a heated arms race for artificial intelligence.

Now we have a first official confirmation of how much this race is costing Twitter.

In mid-June Twitter announced the acquisition of Magic Pony Technology, a company in London that specialises in image recognition. Financial terms of the transaction were not disclosed, but TechCrunch pegged the deal at roughly $150 million (including retention bonuses for the staff of 11).

In Twitter’s latest 10Q quarterly SEC filing on Monday, Twitter notes that it completed two acquisitions during the six months ended June 30, for a total price of $85.2 million.

The filing does not specify which companies it is referring to, nor break down how much of the $85.2 million went to each of the two companies. But there have only been two publicly announced Twitter acquisitions in 2016: Peer, an employee management feedback tool that Twitter picked up for an unknown sum in April, and Magic Pony, which was announced on June 20.

The filing does not mean that Twitter actually paid less than $150 million for Magic Pony.

The deal likely included items like stock-based compensation, which might not be reflected in the SEC filing’s accounting categories, meaning that Twitter wouldn’t necessarily have to disclose that additional amount in this latest filing.

In fact, in the filing, Twitter says that the money it paid for the two acquisitions can be accounted for as follows:

  • $13.3 million for developed technologies
  • $4.4 million for cash acquired
  • $0.2 million for net tangible assets acquired based on their estimated fair value on the acquisition date
  • $2.4 million for deferred tax liability
  • $69.7 million for the purchase price over the fair value of net assets acquired to goodwill

One thing that does appear clear from the filing is that even with complex AI technology, the bulk of the value is in goodwill rather than in the technology itself — at least the technology that’s been developed so far.

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