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Tesla Shares Fell Ahead of Twitter AGM As Musk’s $44Bn Deal Looms

Simon Mugo trader
Updated 25 May 2022

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Key points:

  • Tesla shares edged lower ahead of Twitter’s AGM later today.
  • Elon Musk’s $44 billion acquisition offer will likely take centre stage.
  • Will Elon Musk show up? Read on to find out.

The Tesla Inc (NASDAQ: TSLA) share price edged lower during premarket trading as investors waited for Twitter Inc’s (NASDAQ: TWTR) annual general meeting (AGM) scheduled for today.

Tesla shares were slightly lower ahead of the Twitter AGM, where, unfortunately, the takeover is not part of the meeting’s agenda. Still, we expect that questions about the $44 billion takeover bid will rise, and the social media company will do its best to answer them.

Also read: The Best Large Cap Stocks To Buy Right Now.

Twitter investors may be worried that the deal could fall through after Elon Musk, as the company’s board provides accurate data on how many spam accounts exist on the microblogging site. In addition, many have speculated that Musk wants to lower the price he will pay for the company.

Another factor behind Musk’s bid to lower the price he has to pay for Twitter could be the recent slump in Tesla’s share price amid a broader market selloff, which has lowered the value of his unencumbered shares, which he will use to get a margin loan of about $12.5 billion.

However, if Tesla’s share price drops below $621, it will become more difficult for Musk to fund his Twitter deal since the margin loan that his unencumbered shares could guarantee would fall below $12.5 billion.

Therefore, Musk might be unable to fund his Twitter acquisition if he cannot find a way to lower the price he has to pay for the social media site. Luckily for Musk, the tide seems to be flowing in his favour after Snapchat warned of falling ad revenues yesterday.

The value of most social media sites, such as Twitter, is strongly linked to their revenues, which could work in Musk’s favour as he seeks to convince Twitter’s board to accept a lower price than the $54.20 he had offered for each outstanding TWTR share.

Some analysts opine that if a proper revaluation of Twitter is done, Musk could end up paying in the lower mid $40s for each of the company’s shares, shaving billions off his purchase price. However, with Twitter shares trading at $35.76 today, an acquisition in the mid $40s would still represent a premium for shareholders.

Therefore, Musk’s deal is still the best hope for Twitter shareholders, which should make today’s AGM even more enjoyable. Will Musk show up since he is a shareholder? We do not know, but I’m sure other shareholders would love to hear from him.

*This is not investment advice. Always do your due diligence before making investment decisions.

Simon has over six years of professional trading experience across FX, commodities and equities. He has a strong passion for financial markets and is particularly focused on price action trading