News & Analysis

Musk’s future for Twitter

27 April 2022 By Adam Kahlberg

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<p style=”margin: 0in;”><span lang=”EN-AU” style=”color: #0e101a;”>The future of the large-cap tech giant and social media platform, Twitter, will be one to watch closely after the Board approved tech billionaire and Tesla CEO, Elon Musk’s offer to buy the company. The question remains, is this a positive move for the company and its move into the future?</span></p>
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<p style=”margin: 0in; text-align: left;” align=”center”><strong><span lang=”EN-AU” style=”color: #0e101a;”>Takeover details</span></strong></p>
<p style=”margin: 0in;”><span lang=”EN-AU” style=”color: #0e101a;”>Musk’s offer, which has already been accepted by the board, will take the company private for the first time since 2013. The total amount that will be is $54.20 per share, equating to a value of $44 Billion. There are still several hurdles and regulatory processes that need to be signed off on before the process is completed. The most pressing of these is the shareholder approval. The deal may be finalised in the next few weeks.</span></p>
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<p style=”margin: 0in; text-align: left;” align=”center”><strong><span lang=”EN-AU” style=”color: #0e101a;”>Is this a good deal?</span></strong></p>
<p style=”margin: 0in;”><span lang=”EN-AU” style=”color: #0e101a;”>The question remains, did Twitter shareholders get a ‘bang for their buck’? The reality is it is impossible to know. However, in an ever-increasing market with large competitors such as Reddit, Discord, and Facebook doing everything they can to gain an advantage, relief for shareholders may be welcomed. In addition, with strong inflationary pressures and impending interest hikes, securing a premium offer at a time of high volatility is a somewhat safer outcome for shareholders.</span></p>
<p style=”margin: 0in;”><span lang=”EN-AU” style=”color: #0e101a;”>However, even though whilst the premium paid by Musk caused a 5% jump in the share price, Twitter was trading for 77.06 USD not even 12 months ago, in May 2021. Consequently, Twitter shareholders may feel they are being short-changed by this deal.  </span></p>
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<p style=”margin: 0in; text-align: left;” align=”center”><strong><span lang=”EN-AU” style=”color: #0e101a;”>Musk’s changes</span></strong></p>
<p style=”margin: 0in;”><span lang=”EN-AU” style=”color: #0e101a;”>From an operational and business perspective Musk is hoping to move Twitter back to a more free, less restrictive platform which he feels the company has gone away from. Musk stated in his own words, “Free speech is the bedrock of a functioning democracy, and Twitter is the digital town square where matters vital to the future of humanity are debated.” He has also stated his desire for the company’s algorithms to be made more transparent and the spambots that often troll the feeds to be removed. In terms of profitability, Musk outlined his ambition to improve the cash flows by focusing on implementing subscriptions models. </span></p>
<p style=”margin: 0in;”><strong><span lang=”EN-AU” style=”color: #0e101a;”>Twitter’s Future</span></strong></p>
<p style=”margin: 0in;”><span lang=”EN-AU” style=”color: #0e101a;”>As stated previously, the process for acquiring the company and making it public will not happen overnight and therefore there will still be opportunities to trade the company’s shares, although the price will most likely linger near the offer price for the time being. From a societal perspective, a shift towards a more open and less moderated platform may bring in new and more diverse users and potentially more revenue. On the contrary, Twitter may face some backlash from legal and regulatory bodies for the actions of its users. </span></p>
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<p style=”margin: 0in;”><span lang=”EN-AU” style=”color: #0e101a;”>Lastly, the purchase of Twitter emphasises that there is still value in social media stocks. Therefore, even at a time when technology stocks are selling off, there is still a possible upside opportunity.</span></p>
<p style=”margin: 0in;”><span lang=”EN-AU” style=”color: #0e101a;”> </span></p>
<p style=”margin: 0in;”><span lang=”EN-AU” style=”color: #0e101a;”>As of 26 April, Twitter’s share price was trading at $49.68 USD.</span></p>
<img class=”alignnone wp-image-271272 size-full” src=”https://www.gomarkets.com/au/wp-content/uploads/2022/04/Musk-Twitter.png” alt=”” width=”367″ height=”182″ />

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