Elon Musk placed his $44 billion purchase for Twitter Inc on hold on Friday, sending the social media company’s stock down slightly.
The reactions of analysts to the announcement are included below.
CHARLOTTESVILLE, VIRGINIA’S PETER TUZ, PRESIDENT, CHASE INVESTMENT COUNSEL
“I think of the Musk/Twitter incident as a distraction to serious investing.” It’s fun to watch, and the outcome will be fascinating, but I’m not letting it keep me from looking for good chances.”
SYNOVUS TRUST, ATLANTA, DANIEL MORGAN, PORTFOLIO MANAGER
“My question is whether there’s more to it than just concerns about the number of bot or false accounts.” I know that’s been a topic of discussion on previous Twitter quarterly calls. I’m simply scratching my head as to why that has suddenly become such a significant issue for him and something he’s using to stall his $44 billion deal.”
“Does there seem to be any other financial issues?” I know he had a vast pool of investors, including Oracle’s Larry Ellison, who were eager to contribute to the purchase.”
“Perhaps he believes he can buy it cheaper.” The stock is falling in value. Why has something suddenly shown on his radar screen when he’s been aware of it for a long time?”
NEW YORK’S NATIONAL SECURITIES’ CHIEF MARKET STRATEGIST, ART HOGAN “It’s a dilemma because when you step back and look at the stock action of Twitter since it received the initial offer from Musk, it never priced in more than a 30-40 percent possibility of this really getting accomplished,” he explained.
“There’s been a lot of thought that it might not bear fruit here.” Musk’s comments are now further agitating the situation and producing even more misunderstanding. That is why we are seeing today’s stock market reaction. What exactly does “temporarily on hold” imply?”
“When you’ve made a tender offer for a company, saying it’s temporarily on hold is not conventional operating procedure.” It’s both perplexing and absurd. It simply won’t hold up.”
“Elon Musk, who has already obtained finance for his tender offer, will almost certainly be legally obligated to either complete it or pay the breakup fee, which is not insignificant.”
“Tesla shareholders should not be affected.” He’s had to pledge fewer Tesla shares as collateral for the financing he’s conducting since the beginning of his original offering and till today. So, while Tesla’s impact has lessened over time, there is still some. If he doesn’t have to promise some of his shares, Tesla shareholders may conclude, “OK, he’s not going to be a forced seller to close this acquisition.”
STEPHANE EKOLO, TRADITION, LONDON, UK, GLOBAL EQUITY STRATEGIST
“I believe the Twitter story will remain a Twitter story with no ramifications for the broader market.” After all, this is essentially a merger and acquisitions issue.”
MARKETS.COM, LONDON, UK, CHIEF MARKET ANALYST NEIL WILSON
“I’ve always thought the transaction was questionable, and now I have a feeling it won’t happen, and maybe it never will.”
“I believe (short-seller) Hindenburg nailed it. Can renegotiate a lower price or walks away with a large number of Teslas offloaded.”
AJ BELL, HUDDERSFIELD, UK, DANNI HEWSON, ANALYST
“A lot of investors thought that Musk’s ability to come in and provide a good price per share was providing some sort of safety net at a time when tech stocks were dropping.” The fact that no one else is willing to step in suggests that if this agreement falls through, Twitter will have to kiss its wounds, which will take some time. Investors are simply unsure what this man (Elon Musk) will do next. He’s a complete outcast. Depending on how you look at it, that makes him either incredible or complete liability.”
HARGREAVES LANSDOWN, BRISTOL, UK, SUSANNAH STREETER, ANALYST
“Musk’s Twitter takeover was always going to be rocky, and now the amount of phony accounts on the network threatens to derail it.”
There will also be doubts about whether bogus accounts are the underlying reason for the hold-up, considering that his primary objective for the takeover appeared to be supporting free expression rather than making money.
“The $44 billion price tag is astronomical, and it could be a plan to reduce the amount he is willing to pay for the platform.”
BARCLAYS, LONDON, UK, EMMANUEL CAU, HEAD OF EQUITY STRATEGY
“This adds some uncertainty to the IT sector, but I believe this is company-specific; I don’t see any impact on European stocks, for example.”
It keeps the pressure on the tech industry, but I believe there is only a limited read-across effect to be expected. Of course, this does not contribute to the sector’s optimism.”
CHIEF MARKETS ANALYST, CMC MARKETS, LONDON MICHAEL HEWSON
“Clearly, the markets are anticipating his withdrawal from the contract; otherwise, why are Twitter shares down 20%?” So maybe he’s (Elon Musk) laying the groundwork for a withdrawal from the agreement. However, given the extent he’d gone to arrange to fund for the acquisition, the timing is puzzling. So, perhaps some SpaceX and Tesla stockholders have expressed a desire for him to focus on his principal issues there. This is directly out of Musk’s playbook, designed to keep investors on their toes.”
NEIL CAMPING, MIRABAUD, LONDON, HEAD OF TMT RESEARCH
“Laughable. We’d always said that at 11 a.m., 59 minutes, and 59 seconds on the clock, he might cut, run, or change his mind. It’s ridiculous.” He never had complete funding – we know this because of his repeated attempts to secure funding – but he also held all the cards. And the Twitter board has been taken hostage, and they are solely responsible for the situation. There will be no other buyers; if he remains interested, he can ‘name his price’… and it will not be higher! They (the board) should have anticipated this. The merger agreement featured a particular performance clause (section 9.9) that allowed Twitter to “consummate the completion (of the deal),” but only if he had the funds… which he doesn’t.”