Musk's Coup Complete With $44B Buyout of Twitter
Twitter's board buckles, blesses Tesla CEO's bid, putting a likely end to what has been a mostly disappointing stock.
Elon Musk is buying Twitter (TWTR, $51.70) for $44 billion and taking the social media platform private.
Twitter's board of directors accepted the Tesla (TSLA) CEO's offer of $54.20 a share late Monday. Thus marks the likely end to a three-week drama that at times appeared to veer between comedy and even farce.
After all, with Musk, it can sometimes be difficult to tell the difference. But once the world's richest person lined up more than $46 billion in financing over the past few days, it became clear that his buyout bid was no joke.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
And make no mistake, it's a seriously good deal for TWTR shareholders.
Elon Musk's Buyout Deal for Twitter: The Basics
At $44 billion, Musk is paying a premium of 21% to Twitter's enterprise value, or its theoretical takeout price that accounts for both debt and cash.
The deal looks even better when you consider what the market thought about Twitter prior to Musk's interest – which is to say, not much.
Musk is paying a 38% premium to where TWTR stock traded before the mercurial billionaire disclosed his original 9.1% ownership stake in early April. Even more impressively, Musk's Twitter buyout equals a whopping 54% premium to what he paid when he first began building the position in late January.
The fact is that the market has been very down on Twitter stock for a very long time. Analysts' consensus recommendation has been stuck at Hold for six years, according to S&P Global Market Intelligence.
And with good reason.
Twitter Is Great, But TWTR … Not So Much
Twitter is a classic example of a company with a great product and a fantastic brand – but a bad business. The advertising model that works so well for passive, lean-back screen experiences like television doesn't translate to the active, lean-in engagement process of scrolling and tweeting.
"Twitter does $3.5 billion a year in revenue, a business roughly the size of the Olive Garden," tweeted Josh Brown, CEO of Ritholtz Wealth Management. "You have to admit today is hilarious."
That disconnect between product and business explains why Twitter stock has been such a disappointment for much of its relatively short life in the public market.
TWTR's initial public offering (IPO) priced at $26 a share on Nov. 7, 2013. Musk's takeout price means anyone still hanging around on the IPO cost basis is sitting on a gain of 108%. That's pretty weak, considering the S&P 500 booked a price gain of 141% over the same period.
Musk's Twitter buyout price is also of little solace to anyone who bought the stock when it was hitting all-time highs in early 2021. TWTR once topped out above $77 a pop. Selling to Musk at $54-and-change means taking a loss of 30%.
If nothing else, Musk's involvement in TWTR stock gave it a catalyst analysts had been praying for – and were grateful to receive.
Plenty of them were rooting for Musk to prevail. Some even viewed a potential loss for him as an eventual win for shareholders. As CFRA Research analyst Angelo Zino (Hold) told clients last week:
"We do believe Musk's recent endeavors ultimately ends up being a positive for long-term shareholders even if a deal is thwarted, as it likely lights a fire under the management team (something will need to fundamentally change)."
The ink isn't dry; the deal is far from closed. But the way things look right now, Twitter shareholders won't have to worry about Twitter stock for much longer.
Twitter – all of it – will be Elon Musk's problem, and his alone.
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
Dan Burrows is Kiplinger's senior investing writer, having joined the august publication full time in 2016.
A long-time financial journalist, Dan is a veteran of SmartMoney, MarketWatch, CBS MoneyWatch, InvestorPlace and DailyFinance. He has written for The Wall Street Journal, Bloomberg, Consumer Reports, Senior Executive and Boston magazine, and his stories have appeared in the New York Daily News, the San Jose Mercury News and Investor's Business Daily, among other publications. As a senior writer at AOL's DailyFinance, Dan reported market news from the floor of the New York Stock Exchange and hosted a weekly video segment on equities.
Once upon a time – before his days as a financial reporter and assistant financial editor at legendary fashion trade paper Women's Wear Daily – Dan worked for Spy magazine, scribbled away at Time Inc. and contributed to Maxim magazine back when lad mags were a thing. He's also written for Esquire magazine's Dubious Achievements Awards.
In his current role at Kiplinger, Dan writes about equities, fixed income, currencies, commodities, funds, macroeconomics, demographics, real estate, cost of living indexes and more.
Dan holds a bachelor's degree from Oberlin College and a master's degree from Columbia University.
Disclosure: Dan does not trade stocks or other securities. Rather, he dollar-cost averages into cheap funds and index funds and holds them forever in tax-advantaged accounts.
-
Holiday Office Party Taxes: Know Before You Go
Tax Tips The IRS could tax your gifts from Christmas raffles, Secret Santa, and White Elephant. Here’s how.
By Kate Schubel Published
-
2025 Tax Reform: Will the SALT Deduction Cap Be Repealed?
Tax Deductions Some lawmakers say it’s time to end the $10,000 cap on state and local tax deductions.
By Kelley R. Taylor Published
-
Stock Market Today: Nasdaq Jumps Ahead of Nvidia Earnings
It was a mostly positive start to a new week of pricing in more Donald Trump.
By David Dittman Published
-
Stock Market Today: Stocks Slip After Powell Talks Rate Cuts
The main indexes closed lower Thursday after Fed Chair Powell said there's no rush to cut rates.
By Karee Venema Published
-
Stock Market Today: S&P 500 Tops 6K as Election Rally Endures
The S&P 500 closed just below the 6,000 mark on Monday.
By David Dittman Published
-
Why Is Warren Buffett Selling So Much Stock?
Berkshire Hathaway is dumping equities, hoarding cash and making market participants nervous.
By Dan Burrows Published
-
Stock Market Today: Dow Jumps 1,500 Points on Election Outcome
The removal of election uncertainty unleashed a powerful rally in equity markets.
By Dan Burrows Published
-
Should You Buy Tesla Stock After Trump's Election Win?
Shares in Tesla popped on the outcome of the presidential election. Is it time to buy?
By Dan Burrows Published
-
Stocks Rally on Election Day as Markets Brace for Volatility
All three major indexes opened higher as voters chose the 47th President of the United States.
By Dan Burrows Published
-
Stock Market Today: Stocks Slip Ahead of Election Day, Fed Decision
Post-earnings strength from Amazon and Intel helped cushion the blow of a disappointing October jobs report.
By David Dittman Published