The billionaire investor and CEO of Tesla announced an offer of $54.20 for Twitter stock, which he later called his “best and final” bid for the company.
Musk wants to buy Twitter personally. Tesla is not involved in the deal, although there has been speculation that he will merge the two operations with his other businesses, including SpaceX, into one single holding company, after registering a company called X Holdings.
Musk’s offer for Twitter stock looks like a done deal
As the richest person in the world, Musk shouldn’t have any trouble raising funding for the deal. According to a regulatory filing, he has already lined up $25.5bn in debt financing from key banking partners and is looking to provide $21bn of equity for the deal himself. These funds may come from Tesla’s controversial 2018 bonus scheme.
I say he shouldn’t have any trouble raising the funds as there’s no guarantee Musk’s banking partners will stump up the cash. Part of the debt financing is a margin loan of $12.5bn secured against his stake in Tesla. Equity market volatility could send bankers running if Tesla shares suddenly plunge in value.
There are plenty of other hurdles the deal will have to overcome before the finish line, but where there’s a will there’s a way. While the current market price of Twitter stock is below the offer price of $54.20 (suggesting investors are sceptical), Musk has the resources to push through any deal.
Most importantly it seems as if he has won over the support of Twitter’s management, which only last week tried to block any potential deal by putting in place a so-called poison pill. This would have diluted the billionaire’s stake if he’d bought more than 15% of the business without their approval.
Investors should take the money and run
With tech stocks across the market facing heavy selling pressure, Musk has emerged as a white knight for Twitter’s investors. His interest in the business has shielded its shareholders from the wider market sell-off. As the tech-heavy Nasdaq index has plunged 20% this year, Twitter stock has jumped 20%.
Still, there are many reasons why the deal could fall apart, and considering the current market conditions, there is no telling where Twitter could end up if it does.
As uncertainty prevails, the best option for shareholders may be to take the money and run.
Source: Twitter stock: Elon Musk could be the saviour it needs right now | MoneyWeek
As of now, Twitter is still a publicly-traded company on the New York Stock Exchange. This means that for roughly ~$50 (approx. stock price), you can own a small slice of the social media giant.
However, once Musk follows through on his promise to take the company private, the ability to buy more shares will be over. But even though the deal was struck today, you’ll still be able to buy or sell Twitter stock until the deal is closed.
Dan Raju, CEO of Tradier, tells Select what Twitter shareholders should keep in mind:
- If the deal is done today, it doesn’t mean you can’t continue to buy and sell the stock. However, he strongly believes the share price will likely become “volatile” between the time of announcing the deal to officially delisting the stock.
- Raju said it would be “weeks rather than days” before it’s delisted on the NYSE, and it’s “hard to guess” how long the regulatory process will take.
- His analysis says the acquisition is “good for the stock” and traders could look into call options as a way to bet on the positive reaction if the deal is struck.
So if you desire to have an ownership stake in the future of Twitter before it’s taken private, you’ll need to open a brokerage account where you can buy and hold your stocks. It’s free to open an account with brokerages like Fidelity, Robinhood or Vanguard, which let you buy and sell stock for free.
From there, simply connect a checking account to fund the purchase. Lastly, search the ticker symbol for Twitter, which is “TWTR”, and click the buy button. You can also indirectly own shares of Twitter through ETFs and index funds, which are portfolios of companies compressed into easy-to-buy shares. For example, the widely-known S&P 500 index is made up of just over 500 companies, and Twitter is one of them.
However, be aware that purchasing individual stocks, including Twitter, can be risky — buying Twitter stock above $54.20 could result in a loss.
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