Twitter Has a Fair Bit of Upside Left Amid Musk’s Buyout

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TWTR stock - Twitter Has a Fair Bit of Upside Left Amid Musk’s Buyout

Source: shutterstock.com/khak

The drama regarding Elon Musk’s Twitter (NYSE:TWTR) stock buyout continues in the public eye. Everyone seems to be weighing on the historic consequences of the Tesla (NASDAQ:TSLA) CEO’s acquisition.

Many on the right are celebrating as the buyout is a victory for free speech advocates everywhere. Musk has previously stated that he is a broad supporter of “free speech” and is against censorship in what is now becoming the 21st-century public square.

However, the Democrats and more left-leaning progressive pundits have expressed serious concerns. They have a fear that an unrestrained Twitter could be a breeding ground for potential harm and violence.

I don’t have a dog in this fight. Rather I am more interested in examining TWTR stock as an investment. The upside of the stock is already well known. Musk is offering $44 billion for the company or roughly $54.20 per share. This is roughly a 10% upside from the day’s close of $49.

Now the risk is that the deal doesn’t close. However, Musk has cleared arguably the most difficult hurdle to the acquisition — financing. Initially, the world’s richest man was to personally stake a large portion of his wealth in order to acquire the company.

This means providing a personal guarantee on the entire $12.5 billion loan secured by his shares in TSLA stock. A personal guarantee also means that creditors can chase after all of his possessions. These include other Tesla holdings, Space-X, his equity in Twitter, etc.

With the market in a free-fall, many are wondering how valuable TSLA stock would be as collateral. After all, we have seen previous high-flying stocks fall over 30%-40% in a single day.

There seems to be interest from major Private Equity firms to be part of the Twitter deal. Apollo Global Management (NYSE:APO) and Ares Management (NYSE:ARES). Many hedge funds and high net-worth individuals are also in talks with Musk about providing money for the deal. In my view, the deal is compelling enough for Musk to easily secure financing. TWTR stock could be interesting for traders who want to take advantage of this acquisition spread.

On the date of publication, Joseph Nograles did not have (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.


Article printed from InvestorPlace Media, https://investorplace.com/2022/05/twtr-stock-has-a-fair-bit-of-upside-left/.

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