- Elon Musk is set to buy Twitter (TWTR) for under 20% of his net worth.
- He published a bid worth $54.20 per share last week and has lined up financing.
- The fortunes of the site, and the buyer, may have peaked.
By the time you read this Twitter (NASDAQ:TWTR) may have already agreed to go private. Talks with Tesla (NASDAQ:TSLA) CEO Elon Musk heated up after Snap (NYSE:SNAP) reported a down quarter.
On what may be its last day of trading Twitter was due to open at around $51.50 per share. It was at $47 as trading opened April 22 but has jumped 9% since. Musk bid $54.20 per share for the company and has now reportedly lined up $46.5 billion in financing for it.
Tesla has made Musk the world’s wealthiest man. Forbes estimates his fortune at almost $270 billion, based on his stakes in Tesla and privately held SpaceX. To arbitrageurs, the $3 per share difference between its current price and Musk’s bid looks like easy money.
The next question for investors, however, is whether we’ve hit peak Musk.
| Ticker | Company | Current Price |
| TWTR | $50.71 |
Peak Musk?
Since reporting record-breaking earnings on April 20, Tesla stock is again flirting with $1,000 per share. Earnings under GAAP were $3.3 billion, $2.86 per share and the company had almost $4 billion in operating cash flow during the quarter.
That initially sent shares up by 10%, almost $100 billion. But as talks between Musk and the Twitter board have heated up, shares have cooled off.
That may be down to Musk’s founding of “X Holdings,” which could become a holding company for Tesla, SpaceX and possibly Twitter as well. Tesla investors fear being watered down by Twitter as well as other Musk operations like The Boring Company and Neuralink, which have not proven themselves in the market.
The Twitter move caused Axios to compare Musk with Jay Gould. Gould was a notorious 19th century financier who used his media power to control companies like Western Union.
Peak Twitter
Twitter’s board may be reversing themselves because social media itself may have peaked. Meta Platforms (NASDAQ:FB), parent of Facebook and Instagram, has lost 46% of its value in 2022. Snap is down 35%. Twitter itself was down 23% in early March, before Musk began displaying interest.
Musk himself has been vague on his plans. He talks about encouraging free speech, allowing longer tweets and about defeating spam bots. But Musk has also been a Twitter bully, most recently calling 67-year old Microsoft (NASDAQ:MSFT) co-founder Bill Gates fat after Gates put a $500 million short on Tesla. Musk has since said he is “moving on” from Gates but the internet has a long memory.
Over the last two decades, moderating social media has itself become an industry. The people who do it can end up suffering post-traumatic stress. Musk has called moderation censorship, but the industry has pushed back. Calls for regulation of social media have grown, most recently from former President Barack Obama.
Regardless of the merits, moderation costs money. For all of 2021 Twitter lost $221 million, 28 cents per share, on revenue of about $5 billion. The company’s earnings release highlighted the 37% revenue growth. But what kept shares from losing even more money was a $4 billion share repurchase plan. This would have bought back over 10% of Twitter’s outstanding shares.
Bottom Line on TWTR Stock
Take Musk’s money. History shows that when rich men decide to become kings, they usually fail.
Jay Gould is now forgotten, and the back half of Henry Ford’s life saw Ford Motor (NYSE:F) eclipsed by General Motors (NYSE:GM), and his legacy tarnished by antisemitism.
Whether that is Musk’s fate remains to be seen. What’s clear is the industry he’s entering faces unprecedented challenges. Social media has created immense wealth, but also immense pushback.
This redistribution of information wealth may prove trickier than Musk thinks.
On the date of publication, Dana Blankenhorn held a long position in MSFT. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
