The soap opera continues between Elon Musk and the management of Twitter. (Photo: Getty images)
What to do with Tesla/Twitter, Lightspeed and Quebecor titles? Here are some recommendations from analysts likely to move prices soon. Note: the author may have a totally different opinion from the one expressed.
Tesla (TSLA, US$724.37): Market cap down US$300B since announcement of Elon Musk’s Twitter purchase
Elon Musk said in a conference in Miami on Monday afternoon that fake accounts make up at least 20% of all users of the social network Twitter, which is much more than the figure of 5% put forward by management a few years ago. weeks.
Twitter’s stock reacted badly to the statement, ending Monday’s session down 8.18%, or US$3.33, to US$37.39, a far cry from the US$54.20 bid price. by Elon Musk to buy the social network.
Later in the evening, the colorful businessman added a layer of it, saying that “the CEO of Twitter refused to prove that less than 5% of the accounts were fake. Until he does, the transaction cannot go forward.”
The social network’s stock had already fallen nearly 10% on Friday when Tesla’s CEO announced he was suspending the US$44 billion (US$B) acquisition, casting doubt on fake estimates. management accounts.
“Elon Musk added that the acquisition of Twitter was not out of the question, but at a lower price. Our view of the transaction is that Wall Street confers a probability of more than 50% that the billionaire will withdraw from the transaction, which explains the downward pressure on the title of Twitter”, writes Daniel Ives, analyst at Wedbush Securities.
He believes that Elon Musk uses fake accounts as a scapegoat in order to lower the price of the transaction.
“Even though Elon Musk says he is committed to buying Twitter, the heavy pressure on Tesla’s stock since the deal was announced, a drop in risk appetite in equity markets over the past month, and other financial factors could have cooled the billionaire”, writes the analyst.
According to him, the market capitalization of the electric car manufacturer has shrunk by US$300 billion since the announcement of the acquisition of Twitter by Elon Musk.
The analyst also explains that apart from the emblematic leader of Tesla, no other acquirer will be ready to pay US$44 billion to buy Twitter, and that Elon Musk knows it very well. “The elephant in the room for Twitter is that Elon Musk can walk away from the deal and pocket a US$1 billion severance fee, citing the issue of fake accounts, an explanation that Twitter would surely challenge in court. “.
Daniel Ives believes Twitter management is trapped. It must either agree to sell at a lower price or let Elon Musk withdraw, which would increase the pressure on the title of the social network which could go tickle the US$30.
The analyst recommends that investors keep a bag of popcorn handy, as the “soap will continue this week.”
By betting on a scenario where a transaction would be concluded at a lower price, Daniel Ives reiterates his recommendation of “outperformance” on Tesla’s stock and its one-year target price of US$1,400.