Musk forced to close $44bn Twitter deal
In what will likely be a business case study for years to come, the latest saga in the botched Elon Musk-Twitter acquisition has resulted in court action. Either Musk, CEO of Tesla, continues with his $44 billion deal to acquire a stake in Twitter by the end of October 2022 or he risks court action.
Today, we take a look at the events following the initial Twitter deal, and the fall-out and ask the question all traders are wondering – is Twitter stock a buy?
Twitter – Deal or no deal
Musk is no stranger to controversy surrounding Twitter. His tweets are responsible for some major market movements, especially for cryptoraders; Earlier in 2021, Musk pushed and tanked the price of Bitcoin with a few bizarre tweets. Musk has also been highly critical of Twitter’s blocking and banning policy and has stated on many occasions that should he be in charge of one of the world’s biggest social media platforms he would focus on “freedom of speech”.
This all came to a head on April 14th, when Musk announced an offer to buy Twitter for $54.20 a share. It shocked the tech world and set Twitter shares on fire. By April 25th, Twitter announced it had accepted the deal. It was fantastic news for both the struggling social networking platform and tech traders alike. As months wore on, no news had come out with regards to finalising the deal Musk was critical of whether he should go ahead with the initial offering.
By July 8th, Musk wanted out of the deal, tanking Twitter’s shares. Unsurprisingly, with billions on the line, Twitter sued Musk.
Headed for court battle?
It seemed the two titans of the tech industry would battle it out in court. It looked all but certain for Musk to appear in a proposed five-day trial in October at a Chancery Court in Pennsylvania, USA. Then in another last-minute twist, it appeared Musk might just purchase Twitter and put an end to this bizarre saga.
On October 4th, Musk sent an offer letter to buy Twitter at the original price of $54.20 a share. A judge has ordered that Musk finalise the deal by the end of October or head to court.
With such a market-rollercoaster volatility is inevitable… and where there’s volatility there’s an opportunity for traders.
Twitter shares on a roller-coaster
The Musk buyout was set to be the boon Twitter needed to remain competitive in the tech sector. Twitter’s stock however has been on a roller-coaster since the botched deal. Now, as Musk seeks to finalize the acquisition or head to court to pull out of the deal, is Twitter stock a buy, hold or sell?
Twitter’s stock rose 27% on April 4, when Musk first revealed his intention to acquire a 9.2% stake in the social networking platform. Since then its shares have been volatile, trending negatively.
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When Twitter reported its second-quarter results on July 22, it revealed some of its “battle scars” as a result of its legal woes with Musk.
The company’s reported revenue of $1.18 billion, below expectations of $1.32 billion which equates to a 1% decline from the same period in 2021. It also reported an adjusted loss of 8 cents a share, below expectations of 14 cents.
Its revenue and earnings decline “reflects advertising industry headwinds associated with the macroenvironment as well as uncertainty related to the pending acquisition of Twitter by an affiliate of Elon Musk,” Twitter reported in its July earnings release.
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One of the biggest problems facing Twitter, and all social networking platforms, is a lack of advertising. The 2020 pandemic saw major advertising firms pull out of billion-dollar contracts, a major revenue stream of social platforms. By October 2022, some of that revenue has returned but nowhere near 2019 levels. This means that to survive, Twitter will have to change its business model.
Is Twitter stock a buy?
Given the volatility, should traders snap up Twitter shares? Based on 20 analysts offering 12-month price targets for Twitter in the last 3 months, the stock is currently not a buy. What’s more, no discernible pattern has emerged to suggest a new buy point though this might change when Musk acquires the company or not at the end of October 2022. The stock recently moved above its 200- day and 50-day moving averages to reflect both positive signals.
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Twitter stock: The numbers traders should know
The average price target is $43.13 with a high forecast of $54.20 and a low forecast of $22.00.
The average price target represents a -14.42% Decrease from the last price of $50.40.
Sentiment for the stock shows 68% Bearish vs 32% Bullish
Twitter Q4 report will be very telling for the future of the company. Despite a massive increase in subscribers and viewers, the company is still stalling on profits. If Musk seals the deal and acquires Twitter, the company could be in for a major shake-up.
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- Trending stocks
- Analyst ratings
- Insider activity
- TipRanks smart score
What’s more, it’s completely FREE!
Ready to start trading? Open an account today
Join CMTrading, the largest and best-performing broker in Africa, and discover more opportunities with an award-winning broker. Register here to get started
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