Topline
Shares of Twitter were largely flat on Thursday after Tesla’s billionaire CEO, Elon Musk, offered to buy the company and take it private for roughly $43 billion, a move that some analysts think is just the beginning of a hostile takeover, while others remain highly skeptical.
Analysts are split on whether Musk's acquisition looks likely or remains just a fantasy.
Key Facts
Twitter’s stock jumped as much as 3% before paring back gains, following Musk’s all-cash offer of $54.20 per share to acquire the rest of the company—days after he disclosed a 9% stake, according to filings with the Securities and Exchange Commission.
“Twitter has extraordinary potential… I will unlock it,” Musk wrote in a letter attached to the SEC filing that outlines his plans to make it “the platform for free speech,” adding that if the offer is not accepted, he would need to “reconsider my position as a shareholder.”
Despite the Tesla billionaire’s grand takeover bid, which he claims is his “best and final offer,” the initial reaction from Wall Street analysts was mixed, with some remaining skeptical about whether Twitter would actually accept an offer, while others say that Musk won’t stop until he owns 100% of the company.
Investment firm CFRA downgraded Twitter to a “hold” from a “buy” rating on Thursday, saying the offer price should be “enticing to shareholders” and will be “difficult to reject,” given that Musk is not likely to make a better offer.
Wedbush analyst Dan Ives, meanwhile, believes that the “soap opera” will end with Musk owning the company after an “aggressive hostile takeover,” adding that it would be highly unlikely that any other bidders can make an offer “at this price level.”
This could be another “publicity stunt” or “diversion tactic,” Mirabaud analyst Neil Campling told The Financial Times, pointing out that Musk could be distracting attention from other issues such as Tesla’s closed factory in China.
Contra:
“The Musk bump in Twitter shares is likely to fade as investors realize that Musk is not the answer to Twitter's monetization and user experience challenges,” says David Trainer, CEO of Nashville-based investment firm New Constructs. “Musk's offer to buy Twitter is the latest development in a weeks-long saga that is simply a distraction from the many challenges facing Tesla itself,” he argues.
Crucial Quote:
“It seems hard to imagine Twitter’s board would accept a $54.20 per share bid given the stock was at $70 less than a year ago,” says Vital Knowledge founder Adam Crisafulli. “The question becomes whether Musk would increase his bid,” especially since most of his assets are tied up in Tesla and SpaceX.
What To Watch For:
How Musk could pay for Twitter if his acquisition offer is accepted. The world’s richest person, with a net worth of $266 billion according to Forbes’ estimates, Musk would still have to secure funding to fully buy Twitter and take it private. His offer is dependent upon the “completion of anticipated financing,” per SEC filings, while other analysts like Wedbush’s Ives believe that Musk will likely need to sell some Tesla stock or take out a loan against those shares.
Further Reading:
Elon Musk Wants To Buy Twitter And Take It Private, SEC Filing Reveals (Forbes)
Elon Musk Is Poised For A Hostile Takeover Against Twitter (Forbes)
Twitter Shares Fall After Elon Musk Turns Down Offer To Join Board (Forbes)
