How Musk will profit from buying Twitter
This morning, Twitter confirmed that its board had unanimously accepted Mr Musk’s US$44 billion ($61 billion) bid to acquire the platform after securing funding.
The deal means Twitter will become a private company, meaning investors will receive $54.20 ($75.60) per share they hold.
Gareth Brown is co-portfolio manager for Forage Funds’ international equity fund, which holds a stake in Twitter on behalf of Australian retail investors.
He describes Twitter as “the one that got away”, saying that despite the offer offering investors a “decent bounty”, Twitter never realized its true value as a public company.
“Musk bought Twitter as a platform that gives free speech to the world. With a little bit of us, he’s going to make huge profits too,” Brown said.
“Probably hundreds of billions of dollars. Unfortunately, our own investors will hardly see any of it.”
Mr Brown said Twitter had a “gaping chasm” between its current value and the value it could have under ideal management and execution.
“Executing Twitter’s difficult turnaround after years of lack of potential while pouring out immense undeserved wealth to staff via stock-based compensation? That’s someone else’s problem now,” Ms. Brown.
“But more strongly, I feel disappointment. I’m disappointed that over the years Twitter’s Board of Directors hasn’t been able to do more to exploit this colossal gap between what Twitter is and what Twitter is. could be.
“And now, by choosing to hand over to Musk, that same council has done little to draw the blood out of the new owner to pay the previous owners for all that unrealized potential.”
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Since news of the deal became public, Twitter’s stock has risen nearly 6%, closing trade at US$51.70.
Ben Laidler, global markets strategist at social investment network eToro, said the surprising speed at which Twitter’s board accepted the offer likely means many felt Twitter’s stock was on the brink. of a downward spiral.
“Such a quick capitulation by Twitter’s board of directors to an offer of $54 per share, 30% below the share’s highest price last year, likely reflects the difficult outlook for the media industry. and the only gradual turnaround effect of CEO Parag Agrawal,” says Laidler.
“A successful Twitter bid may also raise concerns for Tesla (TSLA) shareholders, as its CEO becomes involved in another time-consuming venture and could potentially sell some of his 9.1% stake, which is valued at over $90 billion.”
Time-consuming ventures seem to be Mr. Musk’s forte.
Currently, the South African-born entrepreneur is a co-founder and leader of several companies, including Tesla, SpaceX, Neuralink and The Boring Company.
His personal net worth, as estimated by Bloomberg, currently stands at US$257 billion ($357.71 billion), making him the richest man in the world with a gap of over 120. billion dollars – the equivalent of the GDP of the European country, Hungary.
His wealth is strongly tied to the stock options he holds in his own businesses.
He is famously paid a $0 salary by Tesla.