By
Temitope Olatunji
April 23rd, 2024
Twitter’s declines show that investors are worried about the deal with Musk despite the fact that the Board has approved the sale.
Twitter has been plunging, resulting in a $9 billion difference between its current valuation and the amount Elon Musk is willing to pay for the purchase. The social networking company has lost almost 13% since it reached its year-high in April. Twitter has not added any profits over the past month but rather lost more than 10% in the last five days.
The company’s stock closed at $45.08 yesterday, which is about $9 lesser than the amount Elon Musk agreed to pay for each share. Per the filing Musk submitted to the US Security and Exchange Commission (SEC), the billionaire offered to buy Twitter’s Common Stock at $54.20 per share.
Twitter Sees Valuation Loss as Investors Grow Concerns with the Elon Musk Offer
Twitter’s declines show that investors are worried about the deal with Musk despite the fact that the Board has approved the sale. The Twitter board accepted that Elon Musk should buy the social media company and take it private. Twitter noted in the acceptance announcement that the deal was still subject to regulatory and stakeholders’ approval. Even with the Board’s consent, the deal may take months to be finalized and eventually turn unsuccessful. On the other hand, Elon Musk may choose to walk away from the agreement at a price. Breaking up from the deal will require the Tesla CEO to pay $1 billion.
An analyst at Evercore ISI, Mark Mahaney, made a “quick interpretation” of the stock performance. Mahaney stated that the market has doubts about the success of the deal between Elon Musk and Twitter, which has resulted in a reduction in valuation. The analyst said, “regulatory challenges” are of concern to investors.
According to The Information, the FTC is investigating when Musk disclosed his 9% stake in Twitter. Initially, the billionaire did not declare his stake in the company within the ten days mandated by the SEC. Thus, the report says the Federal Trade Commission (FTC) is probing the timing of disclosure.
Meanwhile, Bloomberg stated that the Commission is single-handedly reviewing the acquisition. A reliable source confirmed that the FTC has till next month to decide if the deal requires an in-depth review.
Wedbush analyst Dan Ives believes that there is a high chance for the deal to close. Ives analyzed three factors influencing the pressure on Twitter stock. Firstly, the analyst mentioned that TWTR would trade in $20s as long as it is a public company. He added that regulatory challenges are putting the deal in an unpleasant position. Furthermore, Ives referred to how Musk financed the acquisition. He said the financing puts the deal at greater risk and uncertainty. The analysts’ comments suggest that he is expecting more arising issues.
“This is a soap opera. It’s going to have many different chapters,” said he.