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 stock falls again after Elon Musk bid — Twitter’s board deemed a “toxic pill,” according to the 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 19.00:

  • The S&P 500, which is made up of 500 of the largest listed companies in the United States, fell 0.7 percent
  • The industry-heavy Dow Jones Industrial Average, which is made up of 30 carefully selected stocks that are supposed to be significant, rose 0.07 percent.
  • The Nasdaq Composite Index, which is dominated by technology companies, fell 1.55 percent

Tesla CEO Elon Musk is once again stealing the show on Wall Street. On Thursday morning, news emerged that Musk, who already owns about nine percent of Twitter, would buy the entire company at a company valuation of NOK 375 billion. The bid amounted to $54.20 per share, with a cash settlement, against Wednesday’s closing price of $45.85.

On Thursday, Twitter’s share rose about five percent to $48.2 in the opening minutes, having at one point surged 18 percent in pre-trading.

At 19.00, the stock was trading for $47, up 2.5 percent today, but well below the offer price of $54.2. At one point, the arrow was in red.

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.

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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.

You rarely see such things

Before the exchange opened, Robert Ness, chief investment officer at Nordea, He believes that shareholders will be inclined to accept the offer. He’s surprised Twitter’s stock has so far been trading below the offer price, especially after the stock has gone up much more in pre-trading.

The only logical thing should be that you think the bid will not pass and that there will be no competing bid, says Ness after the stock exchange opened.

– It’s a strange situation, but also interesting. It’s rare to see such things, says Ness.

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 it will finance the acquisition, since most of Musk’s assets are in Tesla stock.

– 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. Ness says he might pick a mix.

Tesla shares fell nearly 4 percent on Thursday.

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.

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“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 that 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.

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 0.5 percent.

The biggest impact was for Wells Fargo’s share, which fell by 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.

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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 two percent on Thursday, and is now down closer to seven percent 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.