SpaceX owner and Tesla boss Elon Musk arrives on the red carpet for the Axel Springer Award 2020 on December 1, 2020 in Berlin, Germany.
Britta Pedersen | Getty Images
It is not often that a company receives a takeover bid equivalent to an 18% share premium, only to see its shares fall in the news.
That’s what happened to Twitter on Thursday after Tesla CEO Elon Musk made a bid to buy the company for $ 54.20 per share, or about $ 43 billion. The stock fell 1.7% to close at $ 45.08 to a market value of $ 34 billion.
In other words, investors do not expect the trade to happen. Analysts at Stifel went so far as to downgrade the stock to a sale on Thursday, saying the company faces a “complete Elon circus.”
Musk certainly has his legions of followers, and he is legendary in the technology world because he has simultaneously transformed Tesla and SpaceX into thriving and truly innovative companies. But years of blasts, hype and unfulfilled promises have left Wall Street skeptical of Musk’s intentions and his ability or willingness to follow up, especially when it comes to big financial deals.
Think back to “financing secured.” That was the tweet from August 2018 that Musk sent, indicating that he was ready to take Tesla privately at the weed lover’s price of $ 420 per tonne. share (in case it helps explain the $ 54.20 offer to Twitter). It’s also the tweet that led to a lawsuit from the SEC and a possible settlement that required a “Twitter sitter” to pre-approve any of Musk’s tweets that contain information about the company that could affect the stock price.
Tesla was never taken privately and instead turned into one of the big stock bets of the next three years. On a split-adjusted basis, the shares have risen over 1,300% since the tweet.
Musk has become fabulously rich in the process, surpassing Amazon’s Jeff Bezos as the world’s richest person. And while running his two main companies and running some others next door, he has found plenty of time to be a regular fuss on Twitter, where he now has 81.7 million followers.
Tesla stock since “financing secured” tweet
Twitter is Musk’s favorite form of mass communication for everything from shouting out crypto-tokens to slapping politicians. He also continues to make proclamations about Tesla’s technology on the site. And recently, it has been his favorite place to criticize Twitter itself for what he sees as ignoring free speech principles and certain technological constraints.
But buy the company? Analysts do not see it.
“While we agree with Mr. Musk’s assessment that Twitter is a low-income-generating platform, we expect the board and key shareholders to oppose the offer because of philosophical differences,” wrote analysts at Mizuho Securities, which has the equivalent of a team rating in stock. One major concern the board could have, analysts said, is “the limited time Mr. Musk has to focus on Twitter, as he is CEO of various technology companies, including Tesla, SpaceX and The Boring Company.”
Then there is the money. Musk is worth about $ 265 billion, according to Forbes, but almost all of his fortune is tied up in his ownership of Tesla and SpaceX. He sold Tesla shares for over $ 12 billion at the end of 2021, which still equates to a fraction of the $ 43 billion offer price for Twitter.
Prior to the bid on Twitter, Musk had bought 9.1% of the company’s outstanding shares this year for over $ 2.6 billion. The stock rose 27% on April 4, the day of Musk’s first revelation of material ownership.
“My offer is my best and final offer, and if it is not accepted, I will have to reconsider my position as a shareholder,” Musk wrote in his proposal Thursday to the Twitter board.
Musk said in an application to the SEC that he hired Morgan Stanley as his financial advisor, but he did not mention anything about partnering with other financiers or firms that could help pay the bill. Later Thursday, Musk admitted he was “not sure” whether he would actually be able to buy Twitter.
At the TED2022 conference in Vancouver, Musk was asked by TED’s Chris Anderson if there was a “Plan B” if the proposal was rejected. Musk replied, “There is,” but he refused to elaborate.
Anderson asked if Musk had “secured funding,” alluding to the infamous tweet about taking Tesla private.
“I have sufficient assets,” Musk said. “I can do it if possible.”
Whether Musk is making a really serious effort to buy the social media company or not, he has created a major distraction for the board as it now has to consider the offer. The board met to discuss the offer Thursday, and CEO Parag Agrawal reportedly told employees that the company was not “held hostage” by Musk’s proposal.
Based on the stock price reaction, Agrawal may have investors on its side. David Trainer, CEO of stock research firm New Constructs, said the bid was a “desperate attempt by Musk to get attention”, and not an honest effort to add value.
“He only offers to buy Twitter because Twitter is the place where Musk is most popular,” Trainer wrote in an email Thursday. “Elon Musk adds no operational value to Twitter shareholders, other than his rock star status, which is not enough to transform Twitter in the long run.”
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