Elon Musk Is Buying Twitter and Taking It Private. Here’s What That Means for Investors
Money is not a client of any investment adviser featured on this page. The information provided on this page is for educational purposes only and is not intended as investment advice. Money does not offer advisory services.
Elon Musk, the richest person in the world, is all set to buy Twitter for a cool $44 billion.
If the transaction is complete, the social media platform will become a private company for the first time since 2013. In the meantime, everyday investors who own Twitter stock are wondering: What does this mean for me?
The move is part of a weeks-long saga between the social media company and the tech magnate. In March, Musk tweeted that he was giving "serious thought" to building his own social media company. He also bought a 9.2% stake in Twitter and in early April, joined the company's board, then reversed that decision days later.
Musk has declared the deal a win for free speech — a sentiment critics have roundly questioned.
If you own Twitter stock, or have been considering buying, here's what you need to know about the deal.
What does this mean for Twitter shareholders?
On Monday, Twitter entered into a $44 billion deal with Musk for $54.20 per share in cash, according to a news release from the company.
The sale was unanimously approved by Twitter's board of directors and is expected to close in 2022. If the deal goes through, Twitter shareholders will get $54.20 in cash for each share they own. In other words, if you own 100 shares of Twitter, you'll get $5,420.
There are several hurdles to cross before the deal is made official, like shareholder and regulatory approval, so it's impossible to say exactly when shareholders would get their money. But Dan Raju, CEO of the brokerage technology firm Tradier, says that based on how similar deals have played out in the past, he estimates the deal will take a week or two to be finalized and for Twitter to be delisted from the New York Stock Exchange (NYSE). Shareholders will likely see payouts two to three days after that, Raju says.
Is this a good deal for Twitter shareholders?
The social media space is becoming increasingly competitive, with more and more users flocking to newer services like Discord, a popular group-chatting platform, Raju says. That makes owning Twitter stock less attractive for investors, and a billionaire buyout a good deal for current shareholders.
Musk's $54.20 per share purchase price is 38% higher than Twitter's closing stock price on April 1, 2022, the last trading day before he disclosed his approximately 9% stake in the company. This means investors who owned Twitter shares before Musk's involvement can expect to profit.
But as James Angel, a finance professor at Georgetown University, points out, the $54.20 per share deal may be more than the value of Twitter's recent stock price, but it's far less than what Twitter stock was selling for just last year. In February 2021, Twitter stock was worth around $77. (As of market close on Monday, April 25, Twitter's stock price was $51.70.)
It's also worth mentioning that Morningstar estimates Twitter's value at $58 per share, which means Morningstar analysts think the Musk deal is less than what their analysis indicates the company is worth.
Will investors still be able to buy Twitter stock?
If the deal is finalized, Twitter will be delisted from the NYSE.
This means that Twitter will no longer be a publicly-owned company, and investors won't be able to buy shares of the company through their trading accounts.
The deal, however, “highlights the value of social media platforms in general” and may make investors see other social media companies, like Meta (Facebook's parent company) as more valuable, says David Sekera, chief U.S. market strategist for Morningstar.
What about Tesla shareholders?
Amid all the Twitter drama, don't forget: Musk runs the electric vehicle company Tesla, which boasts a stock price of around $1,000 as of Monday's close.
Should Tesla investors be concerned about Musk's time being split?
"Running a fast-growing business is a difficult job, and such distractions could harm Tesla," Angel says.
Tesla did not immediately respond to Money's request for comment.
More from Money:
Elon Musk Tweets, and Dogecoin Soars. What Does That Say About Crypto as an Investment?
Mark Cuban and Elon Musk Agree on the Merits of Dogecoin. Crypto Experts Have a Different Opinion