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Twitter (TWTR) Approves Sale to Elon Musk for $54.20/Share
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Amid a challenging Q1 earnings season, a war in Ukraine, inflation we haven’t seen in 40 years and employment we haven’t seen in more than 50, today’s market news impact zeroes in on one man conducting one transaction: Elon Musk, the richest person in the world, is buying Twitter for $54.20 per share, or nearly $44 billion.
It’s an unprecedented spectacle, that’s for certain. There aren’t many things that can garner this much attention from Wall Street based on a simple acquisition. But it’s as much an exercise in realizing possibilities for social media as an industry — and free speech as an overall concept — as it is about an aggressive takeover across industries. Musk will be taking Twitter private, no longer subject to quarterly appraisals of user data.
Twitter’s board unanimously accepted the deal, despite what this might mean for aspects of Twitter’s business like the optimization of advertising dollars. Musk has already said he’s less concerned about maximizing Twitter’s profit potential as he is willing to restore free speech with his control of the platform. Many believe Musk will open the door for former President Trump to regain access to his social media presence, perhaps in time for mid-term elections and certainly ahead of the 2024 Presidential election cycle. So this deal may have major political implications, as well.
Speculation about what’s to come can spin out in numerous different directions, so for now we should keep our perspective within the parameters of what we do know: Musk will be paying 2/3 of this total buying price by himself, with a $12.5 billion margin loan backstopped by $65 billion in Tesla (TSLA - Free Report) stock. This has sent Tesla shares -1.33% at this hour. Musk might also be able to utilize capital from his companies SpaceX and The Boring Company to secure the deal.
There may be a regulatory hurdle facing Musk ahead of the closing of this acquisition, however: initially when he bought a large stake of Twitter stock, he did so filing as a passive investor. He later changed this designation to one of an active investor, but he may have run afoul of the law that protects investors’ interest by having purchasing intentions properly filed with the SEC. It may not be much of a hurdle for someone of Musk’s stature, but it might have been a fatal slip-up for lesser enterprising businesspeople.
In any case, the Twitter board decided this was going to be the best option for their investment. Last November, shares traded north of $70 per share, but the path back to those levels is obviously not apparent to the Twitter board. Thus, $44 billion becomes the cash-out point. Share of Twitter climber +6.4% on the day, to settle just a couple dollars per share below Musk’s stated buying price.
Meanwhile, market indices turned their fortunes around from levels beneath Friday’s lowly closing prices. All four major indices hit session lows around noon and started bouncing back strongly, perhaps bolstered by the Musk news an hour before the closing bell. The Dow, which had been down nearly -300 points this morning, closed +238 points, +0.70%. The Nasdaq almost double this output on the day, +1.29%. The S&P 500 climbed +0.54% and the small-cap Russell 2000 was +0.62%.
Image: Bigstock
Twitter (TWTR) Approves Sale to Elon Musk for $54.20/Share
Amid a challenging Q1 earnings season, a war in Ukraine, inflation we haven’t seen in 40 years and employment we haven’t seen in more than 50, today’s market news impact zeroes in on one man conducting one transaction: Elon Musk, the richest person in the world, is buying Twitter for $54.20 per share, or nearly $44 billion.
It’s an unprecedented spectacle, that’s for certain. There aren’t many things that can garner this much attention from Wall Street based on a simple acquisition. But it’s as much an exercise in realizing possibilities for social media as an industry — and free speech as an overall concept — as it is about an aggressive takeover across industries. Musk will be taking Twitter private, no longer subject to quarterly appraisals of user data.
Twitter’s board unanimously accepted the deal, despite what this might mean for aspects of Twitter’s business like the optimization of advertising dollars. Musk has already said he’s less concerned about maximizing Twitter’s profit potential as he is willing to restore free speech with his control of the platform. Many believe Musk will open the door for former President Trump to regain access to his social media presence, perhaps in time for mid-term elections and certainly ahead of the 2024 Presidential election cycle. So this deal may have major political implications, as well.
Speculation about what’s to come can spin out in numerous different directions, so for now we should keep our perspective within the parameters of what we do know: Musk will be paying 2/3 of this total buying price by himself, with a $12.5 billion margin loan backstopped by $65 billion in Tesla (TSLA - Free Report) stock. This has sent Tesla shares -1.33% at this hour. Musk might also be able to utilize capital from his companies SpaceX and The Boring Company to secure the deal.
There may be a regulatory hurdle facing Musk ahead of the closing of this acquisition, however: initially when he bought a large stake of Twitter stock, he did so filing as a passive investor. He later changed this designation to one of an active investor, but he may have run afoul of the law that protects investors’ interest by having purchasing intentions properly filed with the SEC. It may not be much of a hurdle for someone of Musk’s stature, but it might have been a fatal slip-up for lesser enterprising businesspeople.
In any case, the Twitter board decided this was going to be the best option for their investment. Last November, shares traded north of $70 per share, but the path back to those levels is obviously not apparent to the Twitter board. Thus, $44 billion becomes the cash-out point. Share of Twitter climber +6.4% on the day, to settle just a couple dollars per share below Musk’s stated buying price.
Meanwhile, market indices turned their fortunes around from levels beneath Friday’s lowly closing prices. All four major indices hit session lows around noon and started bouncing back strongly, perhaps bolstered by the Musk news an hour before the closing bell. The Dow, which had been down nearly -300 points this morning, closed +238 points, +0.70%. The Nasdaq almost double this output on the day, +1.29%. The S&P 500 climbed +0.54% and the small-cap Russell 2000 was +0.62%.
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