Key points:
- Since the bid started TSLA and TWTR stock prices have been linked
- Elon Musk has now cancelled the Twitter bid
- So, will Tesla and Twitter stock prices now delink?
The link between the Twitter (NYSE: TWTR) and Tesla (NASDAQ: TSLA) stock prices might be broken now given the recession by Elon Musk of that bid for Twitter. The question is though, how far will both stock prices go in order to balance themselves out given the breaking of that link?
Now, whether there truly was a link – a direct one – is still something to be thought about. But there was at least the thought that there was. For Musk needed to liquidate some of his TSLA stock in order to be able to afford TWTR. Yes, even for the world's richest man there are budget constraints. It was also true that some to near all of his currently unpledged Telsa stock would have to be used to back loans into the Twitter scheme. The exact and precise details were always a little murky but public announcements did indeed tell us that the two were going to be linked.
As we noted last week, there was, therefore, a linkage between those two stock prices, Tesla and Twitter. Elon Musk has now dropped the bid for Twitter. Or at least he has announced that he has. Perhaps this is just a manner of coming back with a lower price. That's not something that London rules would allow but New York is perhaps more liberal on these matters. Or, perhaps it really is a total walking away. This would mean that the link between the two stock prices, TWTR and TSLA, is now broken.
Also read: How To Buy Tesla Shares.
Since the news of the end of the bid – the end so far, dependent upon what Elon Musk does next of course – Twitter shares have fallen 5% on Friday and another 6.6% so far this morning premarket. The question is, well, how much further do they have to fall? There are reports that the Twitter board will be able to force Musk to carry out the takeover at the previously announced price of $54.20. Clearly, with the price near $20 below that, many don't believe that threat. There are also those who think that in the absence of a takeover TWTR is worth in the mid-$20s.
So it's entirely possible that there's more movement to come as the linkage unravels. That linkage also affects Tesla stock of course. Since the same announcement TSLA was up 2.5% on Friday and another 0.77% this morning premarket.
Yes, of course, post- and pre-market trade is thin so price volatility can be greater. On the other hand, we'll not really know the price changes until there's been full market opening and we see the weight of trade either way.
The effect on Tesla stock always was and will continue to be less than that on Twitter. Less directly involved, d'ye see? But it is there – what's going to be interesting is how far the two prices change given the break in the link.