September 26, 2022

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Twitter stock falls again after Elon Musk bid — Twitter's board deemed a "toxic pill," according to the Wall Street Journal.

Twitter share slumps after Elon Musk bid — Twitter board deemed ‘toxic pill’, according to Wall Street Journal

Thursday is the last trading day on Wall Street this week, with the New York Stock Exchange closed on Good Friday.

This is what it looks like for the leading indicators at closing time:

  • The Standard & Poor’s 500 Index, which consists of 500 of the largest listed companies in the United States, fell 1.21 percent.
  • The industry-heavy Dow Jones Industrial Average, which is made up of 30 handpicked, supposedly important stocks, fell 0.33 percent.
  • The Nasdaq Composite Index, which is dominated by technology companies, fell 2.14 percent

Tesla CEO Elon Musk is once again stealing the show on Wall Street. It came Thursday morning in Norwegian time that Musk, who already owns about nine percent of Twitter, would buy the entire company for $43 billion, or 375 billion kroner. The bid amounted to $54.20 per share, with a cash settlement, against Wednesday’s closing price of $45.85.

Twitter’s stock jumped above 15 percent in pre-trading, but rose much lower in early trading, last trading for $45.18 in regular trade. That’s a 1.46 percent drop for the day, and well below the bid price.

During an interview at a TED conference, Musk said he’s not sure if he’ll succeed in the acquisition, even though he claims he has enough funding. Musk added that he had a “Plan B”, without specifying what the plan was.

Musk has a desire to remove Twitter from the exchange, but wrote Thursday night that he would strive to be “as many contributors to privatized Twitter as permitted by law.”

Saudi Prince and Twitter contributor Alwaleed bin Talal and his company Kingdom Company rejected Musk’s offer in a tweet in which bin Talal wrote that the offer was “not close to the inherent values, given the company’s growth prospects.”

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Musk even takes to Twitter to respond to bin Talal.

“Interesting. Just two questions, if I may. How much of Twitter does the kingdom have directly and indirectly? What is the kingdom’s view of press freedom?”

poison pill

On Thursday night Norwegian time, The Wall Street Journal wrote that Twitter’s board is considering a so-called “poison pill,” which in short is a strategy that can be used to make a company less attractive to an unsolicited offeror, in this case Musk.

This “poison pill” may come in the form of Twitter’s board of directors issuing new shares to loosen Musk and prevent him from securing control of the company, but confirmation or more details about such a plan will be awaited.

Musk is the richest person in the world, with an estimated fortune of $259 billion, according to the Bloomberg Billionaires Index. However, it is uncertain how he will finance the acquisition, since most of Musk’s assets are in Tesla and SpaceX stocks.

– Yes, he is good for a lot of money, but he does not have a lot of money. Thus, he must either take out an unpaid loan in Tesla stock or sell himself in Tesla. Investment director Robert Ness told DN on Thursday that he would likely choose a mix.

The Wall Street Journal wrote that Tesla executives can borrow Tesla stock as collateral, but only up to a quarter of the stock’s value. As of December 31, Musk owned 172.6 million shares of Tesla, of which he has already offered 88 million as security for personal loans. It is also uncertain whether such a volatile stake as Tesla would be suitable as collateral for such a massive loan.

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Twitter has extraordinary potential.

Musk himself is an active Twitter user, and with 81.6 million followers, he ranks eighth in the world. He recently refused a position on the company’s board of directors, after it became known that he had bought up to 9.2 percent of the ownership stake.

“I invested in Twitter because I believe in its potential to become a platform for freedom of expression around the world and I believe that freedom of expression is a societal necessity for a functioning democracy,” Elon Musk wrote in a statement.

“But since I made my investment, I now realize that the company will not serve this social imperative in its current form. Twitter needs to transform into a private company,” he adds.

Musk further wrote that this was his “best and last” offer, and that if it was not accepted, he would reconsider his shareholder status.

“Twitter has extraordinary potential. I want to realize that,” concludes Musk.

In a short statement, Twitter confirmed it had received the offer. The Board of Directors will now consider the matter carefully, and then make a decision that is in the best interest of all shareholders.

According to Bloomberg, Vital Knowledge analyst Adam Crisavoli wrote that he believes the bid is too low for shareholders or Twitter’s board of directors, citing the fact that Twitter’s share was just $70 a year ago.

Bank numbers and lower prices

Among individual stocks, investors are closely following the major US banks, which reported first-quarter numbers on Thursday.

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According to Refinitiv, Morgan Stanley, Citigroup, and Goldman Sachs have fared better than expected in both sales and earnings. Shares of Morgan Stanley and Citigroup rose slightly on Thursday, while shares of Goldman Sachs fell slightly

The biggest impact was on Wells Fargo’s stake, which fell 4.5%. The company achieved a somewhat higher result, but at the same time lower than expected revenue in the first quarter. The result was raised by lower loss provisions, which Wells Fargo justified on the grounds that there were fewer risks associated with the economic effects of the pandemic, According to CNBC.

JPMorgan Chase published quarterly numbers on Wednesday, which were slightly better than initial estimates. At the same time, the bank incurred a loss of 524 million dollars due to the consequences of the Russian invasion of Ukraine. The stock fell slightly on Thursday and 5% in total this week.

With inflation rising, the threat of recession and war turmoil, the top managers of the mentioned banks reported increased uncertainty, increased risk of loss, and decreased activity in the capital markets.

Morgan Stanley, Citigroup, Goldman Sachs and JPMorgan Chase have all fallen 15 to 21 percent on the stock exchange so far this year, while Wells Fargo shares are down nearly 10 percent, including today’s drop. (Conditions)Copyright Dagens Næringsliv AS and/or our suppliers. We would like you to share our cases using a link that leads directly to our pages. All or part of the Content may not be copied or otherwise used with written permission or as permitted by law. For additional terms look here.