Controversial Tesla Inc (NASDAQ: TSLA) CEO Elon Musk has Wall Street buzzing after social media platform Twitter Inc (NYSE: NYSE:TWTR) accepted Musk's hostile takeover bid to take Twitter private for $44 billion. Twitter's board of directors accepted Musk's bid on Monday after initially fending off the buyout by adopting a so-called poison pill.
Tesla shares traded lower by 9.5% on Tuesday as Tesla investors mull the potential impact of another Musk distraction, as well as the possibility that he will sell some of his massive Tesla stake to help fund the Twitter acquisition.
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Musk has said his primary interest in Twitter stems from his concerns over its censorship of free speech. Twitter is one of the main ways Musk promotes Tesla, which devotes very few resources to marketing and does not advertise. Musk also has a long track record of attempting to silence journalists and target critics who have been publicly critical of Tesla.
Twitter shares also traded lower by 3.1% on Tuesday to around $50, significantly below Musk's $54.20 buyout price. The discount suggests the market is at least somewhat skeptical that the deal will be completed. It must be approved by both regulators and Twitter shareholders before it becomes official.
Attractive Offer: Raymond James analyst Aaron Kessler said the deal is an attractive offer for Twitter investors.
"Given what appears to have been [no] competing offers and a high likelihood in our view that Twitter would have fallen back to pre-Musk involved levels (sub $40), we believe this is the best near-term outcome for shareholders," Kessler wrote.
KeyBanc analyst Justin Patterson said the big mystery now will be exactly what Musk will do to change Twitter and how much of an impact those changes could have on other big tech companies.
"While we were skeptical a deal would get done, it appears Mr. Musk's desire to own the asset outweighed risks from a slowing brand advertising environment and increased regulation of user-generated content," Patterson wrote.
Wedbush analyst Daniel Ives said the "soap opera ends," likely in large part due to a lack of competing bids for Twitter.
"We do not expect any major regulatory hurdles to the deal getting done as this soap opera now ends with Musk owning Twitter," Ives wrote.
Business Model Overhaul: MoffettNathanson analyst Michael Nathanson said Twitter's buyout price suggests Musk sees a value to the platform beyond its current underlying business.
"Twitter's sale for $54.20 is final evidence that the idea of Twitter has been far more valuable than the actual long-run operations of Twitter!" Nathanson said.
CFRA analyst Angelo Zino said he is skeptical of Musk's vision for Twitter but believes the deal will be approved by Twitter shareholders.
"While we expect to get greater clarity on Musk’s intent with Twitter in the coming months, he has made no secret of plans to soften the stance on content moderation, which supports his vision towards a more subscription-driven business model rather than one that is heavily ad-based," Zino said.
Latest Ratings for TWTR
| Mar 2022 | Deutsche Bank (ETR:DBKGn) | Initiates Coverage On | Hold | |
| Mar 2022 | Benchmark | Initiates Coverage On | Hold | |
| Feb 2022 | Wells Fargo (NYSE:WFC) | Maintains | Equal-Weight |
View the Latest Analyst Ratings
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