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Elon Musk’s Twitter bid faces major skepticism on Wall Street

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Elon Musk, SpaceX CEO and Tesla CEO, arrives at the Axel Springer Award 2019 red carpet in Berlin on December 1, 2020.

Britta Pedersen | Getty Images

Not often does it happen that an 18% takeover offer is made to a company, only for its stock to plummet on the news.

It’s exactly what happened. TwitterAfternoon on Thursday TeslaChief Executive Officer Elon MuskSubmitted a bidThe company can be bought for $54.20 per share or approximately $43 billion. For a $34 billion market cap, the stock fell 1.7% to $45.08, closing at $45.08

Investors don’t believe the deal will happen. Stifel’s analysts downgraded the stock to a Sell on Thursday. The company now faces an “elon circus”.

Musk can be trusted by his many followers and is well-known in the tech industry for turning Tesla and SpaceX both into truly innovative, booming businesses. Wall Street is skeptical that Musk has the ability or will to fulfill his promise, especially in relation to major financial deals, after years of hype, bluster and empty promises.

Remember to “funding secured.”Musk had sent that August 2018 tweet indicating that he would take Tesla private for $420 per share. (In case you are wondering, that’s the explanation of the $54.20 Twitter offer). That tweet also led to an SEC lawsuit and an eventual settlementMusk tweets about company information that may affect the stock’s price, and requires a “Twittersitter” to approve them.

Tesla was not taken private but turned into one the best stock picks over the following three years. The shares have risen over 1,300% on a split-adjusted account since that tweet.

Musk is now a phenomenally wealthy person, exceeding all expectations. Amazon’s Jeff BezosAs the richest man in the world. He’s the world’s richest person, and he runs his main businesses as well as operating other companies. However, he still finds time to be an avid Twitter ranter, with 81.7 million followers.

Tesla stock since “funding secured” tweet

CNBC

Twitter is Musk’s preferred method of mass communications, for everything. This includes touting crypto tokens and slamming politicians. The site is still full of Musk’s proclamations regarding Tesla’s technology. It’s also where he criticizes Twitter for not respecting free speech and other technological limitations.

However, buying the company is not an option. Analysts don’t see it.

Analysts at Mizuho Securities, who hold a stock rating of “Hold”, wrote that they agree with Musk’s conclusion that Twitter was an under-monetized platform. The analysts pointed out that the biggest concern to the board may be “the short time Mr. Musk is able to devote Twitter because he is also CEO of other technology companies like Tesla, SpaceX, or The Boring Company.”

And then there is the money. Musk has a value of $265 billion according to ForbesHowever, almost all his wealth can be found in Tesla’s and SpaceX equity. He sold over $12 billionThe value of Tesla stock at the end of 2021 is still a small fraction of its $43 billion price tag for Twitter.

Musk was Musk before the Twitter bid. had purchased 9.1%Over $2.6 billion in outstanding shares were sold by the company this year. The stock soared 27%Musk made his first disclosure about material ownership on April 4.

Musk tweeted that his “offer is my last and best offer”, and that it was not accepted, and that he will reconsider his status as a shareholder.

Musk stated in an interview filingHe was with the SEC (SEC) that he employed Morgan StanleyMusk referred to him as his financial adviser, but did not mention partnering up with any other financiers or companies that might be able to help pay the bills. Musk spoke later on Thursday. acknowledgedHe stated that he was “not sure” if Twitter would allow him to purchase it.

Chris Anderson asked Musk at the TED2022 conference, Vancouver, if there was a plan B in the event that the proposal was denied. Musk replied, “Yes,” although he refused to give more details.

Anderson wanted to know if Musk has “funding secured”, referring to the famous tweet regarding Tesla’s privatization.

Musk declared, “I’ve got enough resources.” Musk stated, “It’s possible”

Musk’s attempt to acquire the social media company is questionable, but he has created an enormous distraction for the board that must decide whether or not it will make a serious bid. On Thursday, the board discussed the offer with CEO Parag Aggrawal. reportedly told employeesMusk’s proposal was not holding the company hostage.

Agrawal could have some investors backing him based on the reaction to his stock prices. David Trainer, chief executive officer of New Constructs stock research company, stated that the offer was a desperate attempt by Musk to get attention and is not an honest effort at adding value.

Trainer sent an email Thursday saying that Musk only offered to purchase Twitter “because Twitter is where Musk is most famous.” Other than his celebrity status which doesn’t suffice to change Twitter in the long term, Elon Musk does not bring any operational value for Twitter shareholders.”

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