Twitter Shares Could IPO After Elon Musk’s Takeover As the Deal Evolves

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Simon Mugo
Updated: 5 May 2022

Key points:

  • Twitter shares could IPO a few years after Musk’s takeover of the firm.
  • Musk has secured $7.1 billion in additional financing for the acquisition.
  • The deal keeps evolving as many wonder what Musk will do to the platform.

According to a report in the Wall Street Journal, Twitter Inc (NYSE: TWTR) shares could return to the public markets a few years after Elon Musk’s acquisition. The move could unlock significant returns for Musk, who is about to spend a fortune acquiring the microblogging site.

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Market analysts have opined that the scope of changes Musk could make to the site is quite limited given the way it currently works. However, Musk intends to make the critical change to the site is to do away with content moderation, which he can quickly achieve.

Still, Musk will have difficulty making the site more profitable given its much lower user base than other social media platforms like Facebook, Instagram, and TikTok. In addition, he has hinted at removing the advertising function from the platform, which will severely limit the revenues generated by the platform.

Twitter does have a small subscription program in place, and he might consider expanding it to target more users, but how exactly that can work is a mystery. I cannot imagine how many people will sign up for Twitter’s subscription service, which could be similar to how LinkedIn operates.

However, unlike LinkedIn where a paid subscription can get you a job, paying for a Twitter subscription to see Musk and other influencers troll each other might not be on many people’s to-do lists.

Another angle that Musk could explore is turning Twitter into a decentralized autonomous organization (DAO) and moving the entire platform to the blockchain, which could unlock a host of opportunities for the platform. Twitter could even issue its native token and start generating revenues like other leading DAO such as MakerDAO.

How is the deal evolving?

Recent reports indicate that Musk is looking to raise additional capital from high-net-worth individuals to lower the size of the $12.5 billion margin loan he had committed to taking to fund the acquisition. Musk is expected to raise $21 billion in cash for the deal, while a consortium of banks will provide an additional $23 billion for the $44 billion deal.

However, a group of institutions has emerged to back Musk in the deal, with Oracle founder Larry Elison committing $1 billion, Sequoia Capital investing $800 million, VyCapital contributing $700 million, and Binance $500 million and Andreessen Horowitz investing $400 million totaling $7.1 billion.

The additional financing has reduced Musk’s margin loan from Morgan Stanley to $6.25 billion, while his equity commitment has risen to $27.25 billion. We will keep updating you as the deal evolves until it finally closes.

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

Update: Musk is expected to serve as temporary Twitter CEO after the deal closes according to CNBC citing sources.

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