Elon Musk acquires Twitter

What does Elon Musk’s takeover bid mean for the firm and the price of TWTR now that Twitter has accepted it after weeks of resistance?

Twitter agrees to Elon Musk’s $44 billion buyout

Elon Musk has signed into a binding agreement to buy Twitter for $54.20 per share, which values the social media service at $44 billion. If successful, Musk, the creator of Tesla and SpaceX, will delist Twitter from the stock market and take the business private.

After a tumultuous beginning to their relationship, the two sides came to an understanding after Twitter’s board adopted a deterrence strategy to prevent anyone from acquiring more than a 15% stake in the company after Musk rejected his offer to join the board in exchange for a promise to cap his stake.

Is Twitter Worth $44 Billion?

The $54.20 per share offer marks a 38 percent premium to Twitter shares’ market price of $39 when Elon Musk initially disclosed he had purchased a 9.2% stake in the company on April 1.

However, it’s vital to remember that Twitter shares have infrequently traded above Musk’s offer price since its IPO in 2013. The price is significantly lower than Twitter stock prices on the stock market at $77 in February 2021. In its history, TWTR shares have only sometimes been able to hold above this level on the stock market.

It will likely take some time before Twitter shares restore their stock market value sans Elon Musk’s bid for the company given that Twitter generated just over $5 billion in revenue and reported an operating deficit of $493 million in 2021.

“The Board of Twitter undertook a rigorous and thorough evaluation of Elon’s proposal with a deliberate focus on value, certainty, and money. We think the proposed deal is the best course of action for Twitter shareholders since it will result in a sizable cash bonus, said Bret Taylor, independent chairman of Twitter.

Elon Musk previously disclosed that he received $46.5 billion in funding for his acquisition of Twitter. Except if he can get some partners to assist fund the purchase, Musk will have to provide the $25.5 billion in debt financing and the $21 billion in stock. A margin loan against his Tesla stock holdings accounts for somewhat less than half of the debt funding.

There were “no funding requirements to concluding the transaction,” according to Twitter, because funding had already been secured.

When will the Twitter takeover be complete?

The takeover was approved by Twitter’s board in a unanimous vote, and as of now, the only significant obstacle remaining is shareholder approval. If they do, the transaction should be completed in 2022.

It’s not yet known whether any further possible difficulties might materialize. Where Elon Musk gets the $21 billion in funding is currently the more important topic. Additionally, it has been proposed that authorities might intervene, with numerous well-known politicians participating in the discussion on Twitter, of course.

Notably, Twitter shares are up in early trading ahead of the market today, but they are still below the offer price, indicating that the markets are still unsure about whether the acquisition will close.

What will Elon Musk do with Twitter?

Elon Musk wants to take Twitter private because he thinks it needs to undergo important adjustments that can’t be made while it’s publicly listed and concentrating on increasing value. Musk has previously stated that he doesn’t care “at all” about the deal’s finances and instead wants to make Twitter a more reliable and inclusive platform.

Elon Musk stated in a statement that “free expression is the cornerstone of a healthy democracy, and Twitter is the digital public square where topics crucial to the future of humanity are debated.” Additionally, I want to improve Twitter by adding new features, opening up algorithms to the public to boost trust, eliminating spambots, and authenticating every single user. Twitter has a ton of potential, and I’m excited to work with the company and the user base to realize it.

The founder of Twitter, Jack Dorsey, who left the organization last year, applauded the acquisition and claimed that Twitter had suffered as a result of being supported by the media and at the direction of shareholders, saying that “bringing it back to Wall Street is the appropriate first step.”

What future for Twitter?

For Twitter, there are a lot of unsolved questions. Little is known about the person Musk would choose to lead the platform, and there are questions about how the staff will react to the company’s ownership by someone who has been very critical of the platform. Some staff will be concerned about their future employment despite promises to ease restrictions and expand free expression.

There is also intrigue in how much time Musk will spend pursuing his Twitter goals and how that might divert him from his expanding empire, which now consists of enormous businesses like Tesla, SpaceX, the Boring Company, and Neuralink.

What will users think of Musk’s takeover and the modifications it enacts? Some have speculated that the platform’s demand would drastically shift if a subscription model is implemented. “Even my fiercest critics stay on Twitter because that’s what free expression entails,” Elon Musk wrote in a tweet.

And how will regulators, who frequently urge social media companies to better control their material, react to Elon Musk’s proposal, especially given that he has previously run into them on a number of occasions in recent years?

Although there may be an agreement, there is still a great deal of uncertainty for Twitter as the takeover proceeds.

Overview of Twitter’s first quarter results

After meeting with Musk on Sunday to finalize the transaction, it appears Twitter’s board wanted to decide on his offer before disclosing first-quarter earnings after the close of market on Thursday, April 28. ‘ OK. When the results are announced, the takeover will undoubtedly be the main topic of discussion, but it should be remembered that the board of directors has stated that it will not have its customary conference call after the offer. However, the board enters this earnings season with more knowledge of the situation than if it were still secretly talking with Musk.

Wall Street anticipates that Twitter will have had 226 million users at the conclusion of the first quarter as opposed to 217 million at the end of 2021. Significantly, that would represent the quickest sequential gain in more than 18 months. Adjusted EPS is anticipated to decrease to $0.03 from $0.16 a year earlier while revenue is anticipated to increase 19% year over year to $1.23 billion.

What’s next on the stock market for TWTR shares?

The markets stopped trading in Twitter shares late yesterday as they awaited the big announcement, but they are likely to resume trading today. Before the bell, Twitter stock is up 0.6 percent at $52, indicating that there are still doubts about whether the acquisition will go through. Markets will also take into account the limited upward potential from current levels, since there are other chances in the market that are worth pursuing.

Twitter’s daily chart (NYSE: TWTR)

Tradingview and Stone X as sources

If a new surprise bidder steps forward with a greater offer, it might open the door to additional upside potential and set a fresh cap for the stock price. However, with $54.20 already virtually locked in, this will act as an exchange cap for the action as long as the takeover is still on the table.

The downside risks currently outweigh the potential for growth. Before it was made public that Musk had invested in the company, Twitter shares were trading closer to $39, and they may drop as low as the 20-month low in the near future. if the agreement has significant difficulties or falls apart for some reason, at the $31 negotiated in February.