- Elon Musk edges closer to Twitter acquisition for a price of $54.20 per share
- Finance arrangements have proved pivotal to the Boards view of Musk's bid
- The buyout will not result in a major sale of TSLA shares
- Nasdaq selloff means Musk's $54.20 bid seems more attractive
Elon Musk has long been known not just for Tesla or SpaceX, but more culturally for stirring up public opinion on social media. His tweets have moved entire markets and bred contentiousness, and currently, his pursuit of free speech has never been more topical; following his intended acquisition of his favored platform…Twitter (NYSE: TWTR). The news took the public by storm, and immediately spurred movement in TWTR shares after Musk proposed a bid of $54.20. Shares are currently trading around the $50 mark in anticipation oif the takeover.
The deal neared closure this morning, with rumors that the Twitter Board and Elon Musk were in solid discussions through to the early hours of Monday. It seems that the Board was partially swayed by Musk’s no-nonsense financing; lining up $46.5B towards the end of last week, a turning point for how the Board views Musk’s offer. Sources claim the two parties were discussing details including a closing timeline and fees involved should the deal fall through for some reason.
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Twitter is set to report its earnings later this week, which Wedbush analyst Daniel Ives states will “‘likely not be rainbows and smiles”. Ives argues that this will only put more pressure on the company to act on Musk’s offer. He also believes that Musk is likely to partner with a PE partner for further financing help once negotiations are formally underway. Investors should also be aware that should the acquisition go through, it won't result in a major sale of Musk’s Tesla shares, instead being used as pledged shares for the loans obtained by Musk. On these grounds, Ives maintains an Outperform rating and a price target of $1,400 for TSLA.
Don Bilson, head of event-driven research at Gordon Haskett argues that Musk’s bid is more or less intune with the recent market selloff. Many argue Musk’s bid of $54.20 per share to be veering on the low side, but Bilson contends that due to the 10% selloff in the NASDAQ, the bid seems more attractive. Analyst from Loop Capital Alan Gould downgraded Twitter to Hold from Buy, citing the fact that the current share price is within 5% of Musk’s $54.20 offer, hitting his fundamental price target. Gould also notes that the Twitter buyout is looking ever more realistic on the grounds that other bidders are unlikely to emerge.