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Wedbush highlights options available to Elon Musk in his battle for control of Twitter

Wedbush highlights options available to Elon Musk in his battle for control of Twitter

Marco de Matos, Anchor Research

According to Wedbush Securities’ research, Musk now has three options available to him. Bloomberg reports that Wedbush analyst Dan Ives believes that Musk could take one of three possible next steps in his fight to buy Twitter.

These include:

  • The first option is to "formally lay out his financing" for Twitter, by putting debt and collateral of Tesla and SpaceX stock, and a vision of his strategy in a letter and presentation to the company’s board of directors and shareholders. Ives writes that “Given Musk’s antics over the years as well as comments at an April TED conference, Wall Street remains sceptical on this bid and more details need to be highlighted to get more investors on board and increase pressure on the (Twitter) Board.”
  • The second option is for Musk (who, with his current stake in the company is its second-biggest shareholder) to team up with a strategic partner and increase the offer price to US$60/share (it is currently at US$54.20/share), which Ives believes is likely to be seen as “more appropriate” by many shareholders.
  • The third and final option (which Ives believes is the most unlikely) is for Musk to sell his shares in the company and walk away.

However, Ives notes that there is also the possibility that another option emerges this week, such as a second bidder. On 15 April, Reuters reported that the tech-focused private equity firm, Thoma Bravo was interested in buying Twitter. Nevertheless, Ives postulates that it is unlikely Twitter will be bought by a private equity firm, because of the company’s business model and its low free cash flow. Twitter’s share price closed 18 April at US$48.45.

Written exclusively for Moore South Africa by Marco de Matos from Anchor Research.