Elon Musk's Twitter stake does not rule out full buyout, analyst says
Musk has become Twitter's largest shareholder after acquiring a 9.2% stake
Jeff Sica on Circle Squared Investments on Elon Musk owning a 9.2 percent stake in Twitter and cities facing housing crisis as rent costs rise.
Elon Musk disclosed a 9.2% stake in Twitter on Monday, sending the company's stock soaring more than 25%. But some analysts don't see the Tesla chief executive stopping there.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| TWTR | NO DATA AVAILABLE | - | - | - |
Though the billionaire's stake in the social media company is considered passive, some Wall Street analysts believe Musk has much more planned for Twitter's long-term strategy.
ELON MUSK TWEETS FIRST WORDS SINCE BECOMING TWITTER'S LARGEST SHAREHOLDER
While Musk has expressed interest in building a rival to Twitter, CFRA Research senior equity analyst Angelo Zino warns that a potential all-out buyout of the company could still be on the table.
"While a passive stake by Musk won't change TWTR's fundamentals, we do think his investment will drive greater interest from consumers," Zino wrote in a note to clients on Monday. "Musk's actual investment (less than $3B) is a very small percentage of his wealth and an all-out buyout should not be ruled out."
CRFA maintains a "buy" rating on Twitter's stock and has upped its 12-month target price by $13 to $55 per share.
ELON MUSK PURCHASES STAKE IN TWITTER AFTER SLAMMING ITS APPROACH TO ‘FREE SPEECH’
Musk's latest move follows his recent criticism over the social media platform's approach to free speech. He has also previously been critical of Twitter CEO Parag Agrawal, comparing the executive to Joseph Stalin, the former leader of the Soviet Union.
The billionaire posted a Twitter poll in March questioning whether the platform allows users to speak freely.
"Free speech is essential to a functioning democracy. Do you believe Twitter rigorously adheres to this principle?" he wrote.
More than 70% of respondents said Twitter lacked a commitment to free speech, leading Musk to ask his more than 80 million followers, "What should be done?"
"Given that Twitter serves as the de facto public town square, failing to adhere to free speech principles fundamentally undermines democracy. What should be done?" Musk wrote in another tweet on March 26. "Is a new platform needed?"
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Wedbush Securities managing director of equity research, Daniel Ives, told FOX Business that Musk's stake will not remain passive for long, noting it is just the start of broader conversations with the company's board and management.
"We believe there is a better chance of us playing in the Masters this weekend than Musk staying a passive investor at 9%," Ives said. "The Street is reading this as a first move for Musk in an eventual active role at Twitter."
Tesla CEO Elon Musk acquired a 9.2% stake in Twitter. (Reuters/Michele Tantussi / Reuters Photos)
Morningstar senior equity analyst Ali Mogharabi said in a note to clients that news of Musk's stake offers the social media platform an opportunity to potentially increase its user base and engagement and attract more advertising dollars. Twitter currently has 217 million daily active users.
He also believes Musk could "influence the openness" of Twitter's platform and how it controls content.
"Musk has already indicated that he did not agree with the appointment of Agrawal and that he desires some changes," Mogharabi said. "This creates a bit more uncertainty about how Agrawal and the firm may respond to the firm’s now largest shareholder, which supports our very high uncertainty rating."
In addition, Mogharabi believes Musk could help push the platform to invest more aggressively in its recently launched Twitter Blue subscription service, which offers premium features and app customizations for a small monthly fee.
Morningstar maintains a fair value estimate for Twitter of $58 per share.