• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • TheStreet Smarts
  1. Home
  2. / Investing
  3. / Stocks

Elon Musk's Bid for Twitter Is a Machiavellian Play

Let's consider how this might play out.
By ED PONSI
Apr 15, 2022 | 07:00 AM EDT
Stocks quotes in this article: TWTR, TSLA

On Thursday, market talk was dominated by Elon Musk's bid for Twitter (TWTR) . I believe Musk will eventually own the company, one way or another.

Earlier this week, I wrote about Musk's penchant for humor. Did you notice the reappearance of the number 420 in his $54.20 bid for Twitter? This is a reference to marijuana, and is apropos his "funding secured" tweet, in which he mulled taking Tesla private at $420.

I also wrote about Musk's tendency to go all-in on his ideas, and that 9.2% or even 14.9% ownership of Twitter would be insufficient.

In a new statement, Musk has now indicated that he wants to take Twitter private. In other words, he wants it all.

Musk said his $54.20 per share bid is his "best and final offer" for the social media network. Musk also implied that he might sell his shares of Twitter if his terms aren't met. It's an all or nothing deal.

Let's consider how this might play out.

Musk's offer will not be accepted. Just over a year ago, Twitter was an $80 stock, so it's unlikely that a buyout price of $54.20 would generate much excitement. Musk knows this to be true.

If Musk then sells his shares, the stock might drift back to the mid-$30's. That's where Twitter was trading prior to the initial news of the Tesla (TSLA) CEO's interest in the company. This will irritate shareholders, who in hindsight will question why a deal with Musk wasn't consummated.

If a market downturn should occur -- the likelihood of which is increased in the current interest rate environment -- we could see Twitter in the mid-to- upper-$20's. If that happens, shareholders will be begging for a buyout at $54.20. In this scenario, that price could represent a gain of 100% for shareholders.

Of course, that $54.20 price would be off the table. At this point, Musk can either start buying shares again at a lower price, or come in with a lower bid.

On the other hand, if Twitter's price moves higher, he could simply choose not to pursue the company.

I believe it would be a mistake to treat Musk's bid for Twitter as if it were a typical M&A deal. While some may feel this bid is ill-advised from a business standpoint, we need to understand that typical business concepts are irrelevant in this case.

Musk has decided that he wants to own Twitter, and I expect that will happen at some point. If the above scenario unfolds, he might end up owning the social media company for even less than his current bid.

(Ed Ponsi is a regular contributor to Real Money Pro. Click here to learn about this dynamic market information service for active traders.)

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Ponsi is long TWTR.

TAGS: Mergers and Acquisitions | Investing | Stocks | Trading | U.S. Equity | Elon Musk

More from Stocks

5 Factors to Watch in an Oversold Bounce

James "Rev Shark" DePorre
Oct 4, 2023 11:35 AM EDT

If you're stalking a counter-trend upswing in the market, then pay attention to how these scenarios play out.

Apple to the Core: Is It Better to Reduce Than Add Here?

Stephen Guilfoyle
Oct 4, 2023 10:45 AM EDT

The firm's products are profitable, but they are just the key. The key that unlocks much higher margin businesses elsewhere and going forward.

What's Next for Bank of America as the Charts Turn Ugly?

Bruce Kamich
Oct 4, 2023 9:50 AM EDT

Future declines may be likely.

The Uglier Equities and Economic Conditions Get, the More Conservative I Become

Bret Jensen
Oct 4, 2023 9:30 AM EDT

My portfolio definitely isn't sexy as it is focused more on preserving capital than aggressively trying to grow it.

Tom Lee: When a Trade Becomes Obvious, That's Often When the Trend Can Reverse

Tom Lee and the FSI Team
Oct 4, 2023 9:15 AM EDT

Is this becoming a 'single issue' market singularly focused on yields? That will eventually change, but the turning point seems a bit away.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 12:13 PM EDT BRUCE KAMICH

    8 Trading Rules from T. T. Hoyne

    You just read the header for this missive and prob...
  • 08:42 AM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    How Elite Traders Make Big Profits
  • 02:58 PM EDT BRUCE KAMICH

    Classic Trading Rules From Bernard Baruch

    Bernard Baruch listed the rules (below) in his aut...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2023 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login