Twitter, Musk fight escalates: Poison pill, Musk’s plan B ‘and a shared Wall Street

Tesla CEO Elon Musk’s surprisingly unsolicited offer of $ 43 billion on Twitter started a tumultuous week for the social media giant and its investors, which ended with Friday’s poison pill ‘via Twitter’s board to stop Musk in his tracks.

Now it’s everyone’s guess what’s going to happen next. FOX Business takes a deep dive into recent developments and what investors and analysts predict.

Poison pill backfires ?: Wedbush’s Ives

Wedbush securities analyst Dan Ives told FOX Business on Friday that Twitter’s move to prevent a takeover from Musk is a “predictable defensive move” that “will not be viewed positively by shareholders given the potential dilution and acquisition-friendly moves” . “

Elon Musk gestures as he speaks during a news conference at SpaceX’s Starbase facility near Boca Chica Village in South Texas on February 10, 2022. (Photo by JIM WATSON / AFP via Getty Images / Getty Images)

Under the plan, also referred to as a “poison pill”, shareholders’ rights will be exercised if an entity, person or group acquires real ownership of 15% or more of Twitter’s outstanding ordinary shares in a transaction not approved by the board. In the event that the rights become exercisable, existing Twitter shareholders – other than the person, entity or group triggering the plan – will be entitled to purchase additional shares in ordinary shares at a discount. Musk currently has one 9.2% ownership interest on Twitter.

“The board has its back to the wall, and Musk and the shareholders are likely to challenge the benefits of the poison pill in the courts,” Ives explained. “We think Musk and his team expected this poker move, which will be perceived as a sign of weakness, not strength from Street.”

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Musk and Twitter are fighting for the next move

Going forward, Ives says Musk will have to provide the details behind his $ 43 billion bid for the deal and return to Twitter’s board with a formal response. Meanwhile, he expects Twitter will launch a strategic process to look for other buyers.

Ticker Security Last Change Change %
TWTR TWITTER INC. 45.08 -0.77 -1.68%

Musk who has offered to take Twitter privately at 54.20 USD pr. shares, has stated that the $ 43 billion bid is his “best and final” bid. However, he revealed at TED2022 on Thursday that he is prepared with a “plan B” if the offer is formally rejected. He did not elaborate on the details of this plan.

Twitter shares YTD

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Stay Long Twitter: T3 Trading

T3 Trading chief strategist Scott Redler believes investors should take to Twitter for a long time to argue that the company is currently an “undervalued” and “poorly managed” asset that has the potential to become a platform for community improvement.

“I do not think Twitter should be a private company. I think Elon should be on the board. It would have been better if he bought 14% so he could have shaken the tree,” Redler told The Claman. Countdown “on Thursday.” I think the business could be run better. I think the features could be more up to date. I think they could get more users. They could make more money. And that’s what Elon was trying to do. ”

“But now with this $ 54 bid, it just wasn’t enough, and now it’s turning into a bit of a mishmash, where the market does not believe it, the board does not know what to do, and he can come in. higher, even though he said best and final, which is never really best and final, “adds Redler. “So he’s created a precarious situation where it’s going to be interesting to see how it all turns out.”

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Twitter can, should improve its product: JPMorgan

JPMorgan analyst Doug Anmuth told customers that Musk’s offer is “credible” and “represents a 54% premium from where TWTR traded before it began acquiring shares.” However, he acknowledges that it is also well below the company’s highs in March 2021. The company maintains a “overweight” rating on the stock.

“We believe the stock will have significantly greater upside if management is able to execute its plan to innovate on the product, increase user base by ~ 20% and build direct response advertising,” Anmuth said in a note Thursday. “We therefore do not expect the offer to be accepted by the board.”

Downward risk for equities: Stifel

Meanwhile, Stifel analyst Mark Kelley believes the bid “sets a short-term cap on equities, separates the company from fundamentals and offers a significant downside risk if Mr Musk decides to abandon his offer or sell his stake down.” Stifel has downgraded the stock from “hold” to “sell” and warns that a rejected bid could cause Twitter shares to “sell drastically.”

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Twitter could seek a consortium of investors ?: Jefferies

Jeffries, who maintains a “hold” rating on Twitter shares, notes that a sell-off of more than 20% on a rejected Twitter bid “will definitely present value to a strategic investor.”

“In our view, this could be a positive outcome, as TWTR would probably prefer a consortium of investors rather than being controlled by a single large owner,” Jeffries analyst Brent Thill told clients Thursday.

Thill believes that Twitter is probably looking for an offer of at least $ 60 per. shares.

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