This morning, all eyes are on Twitter (NYSE:TWTR) stock after Tesla (NASDAQ:TSLA) CEO Elon Musk proposed to take the company private at $54.20 per share, valuing it at $43.4 billion. Musk already owns a 9.2% stake in TWTR stock, so the proposal is to buy the remaining available shares. The proposal price also represents an 18% premium to yesterday’s close.
Currently, shares of TWTR stock are up more than 2% on the news. Here’s what investors should know moving forward.
What Does Musk’s Bid Mean for TWTR Stock?
Elon Musk has created quite a situation for Twitter shareholders. In an amended 13D filing, the Tesla CEO stated the following:
“[S]ince making my investment I now realize the company will neither thrive nor serve this societal imperative in its current form. Twitter needs to be transformed as a private company.”
If Twitter accepts the executive’s offer, the company will effectively be removed from the New York Stock Exchange and cease to be tradable by the public. Further, shares of TWTR stock may plummet if the board rejects the proposal. Musk explained that, if the offer is not accepted, he would need to “reconsider [his] position as a shareholder.” The bid is also his “best and final offer.” Twitter’s board is meeting this morning to discuss the proposal.
Even if the board rejects Musk’s offer, the message is clear: Twitter needs change. Lately, the social media platform has had a history of lackluster feature rollouts, such as Twitter Fleets and Twitter Blue. In addition, user calls for an edit button have been active for years now, with the company yet to release an update. There may be a silver lining, though. On April 1, Twitter’s official account tweeted that the company is “working on an edit button.”
Twitter is currently trading at around $47, or roughly 12% below the bid price. This may suggest that TWTR stock shareholders are acknowledging there’s a risk of the proposal being rejected.
As of now, it’s unclear how Musk plans to finance his proposal if accepted. The CEO may sell TSLA stock or borrow against his Tesla position, among other options. Musk currently owns around $177 billion of TSLA, according to CNN Business.
How Do Analysts Feel About the Elon Musk Twitter Offer?
Wedbush analyst Dan Ives believes this proposal price is attractive and may put “Twitter board’s backs against the wall.” However, to get an acceptable return on his investment, Musk must enact several changes. These include increasing subscription revenue and cutting costs.
Meanwhile, Vital Knowledge President Adam Crisafulli believes the offer is too low since Twitter traded in the $70 range less than a year ago. Gene Munster of Loup Funds chimed in as well. Munster tweeted, “Put it all together; Musk taking over Twitter is more likely than not.”
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
