Stocks traded lower this morning as big bank earnings rolled in. Goldman Sachs (NYSE: GS), Morgan Stanley (NYSE: MS), and Citigroup (NYSE: C) all reported “beats” before the market opened. GS fell slightly while MS and C popped higher.
But all three stocks remain well below their recent highs after selling off over the last few weeks.
Overall, bank shareholders have had little to look forward to due to an ever-dysfunctional yield curve. Last quarter’s earnings did little to change that.
The biggest story of the morning, however, was undoubtedly Elon Musk’s offer to purchase 100% of Twitter (NASDAQ: TWTR) at $54.20 per share just 10 days after he announced a newly-acquired 9.2% stake in the company.
“I invested in Twitter as I believe in its potential to be the platform for free speech around the globe, and I believe free speech is a societal imperative for a functioning democracy,” Musk wrote in a letter to Twitter’s chairman.
“However, since making my investment I now realize the company will neither thrive nor serve this societal imperative in its current form. Twitter needs to be transformed as a private company,” he continued.
“As a result, I am offering to buy 100% of Twitter for $54.20 per share in cash, a 54% premium over the day before I began investing in Twitter and a 38% premium over the day before my investment was publicly announced. My offer is my best and final offer and if it is not accepted, I would need to reconsider my position as a shareholder.”
Musk concluded, adding that “Twitter has extraordinary potential” and he “will unlock it.”
Twitter announced that its board would meet at 10 am EST to discuss the offer. Shortly before noon EST, company leadership said that it would hold an “all hands meeting” with employees to discuss Musk’s bid at 5pm EST.
The offer was met with skepticism by many analysts.
“It seems hard to imagine TWTR’s board would accept a $54.20/shr. bid given the stock was at $70 less than a year ago,” said Vital Knowledge founder Adam Crisafulli.
Others thought Musk’s bid was simply a sideshow, intended to serve as a diversion for Tesla (NASDAQ: TSLA) shareholders.
“The Musk bump in Twitter shares is likely to fade as investors realize that Musk is not the answer to Twitter’s monetization and user experience challenges,” said David Trainer, investment firm New Constructs CEO.
“Musk’s offer to buy Twitter is the latest development in a weeks-long saga that is simply a distraction from the many challenges facing Tesla itself.”
But it wasn’t all doom and gloom on Wall Street. Piper Sandler analysts called the offer “reasonable” while Bloomberg observed that a competing bid would be unlikely to exceed $50 billion. At $54.20 per share, Musk is seeking to take the company private for a total of roughly $43 billion.
The most confounding take came from Goldman Sachs, whose strategists were hired to advise Twitter’s board in regard to Musk’s offer. They said $54.20 was too low to be taken seriously, yet Goldman currently has a SELL rating on TWTR with a price target of just $30 per share.
And, ironically, the stock may very well fall to $30 per share if Musk’s bid is rejected. He said that in the event that the board refuses his offer, he may sell the entirety of his 9.2% stake in the company.
TWTR reversed sharply after opening significantly higher this morning as investors began to price this in.
Given the stock’s major skid over the last year, however, it’s likely that many TWTR shareholders would welcome Musk’s offer. TWTR hit a new 2022 low at $31.30 per share in late February. Most of its rally since then was driven entirely by Musk’s announcement that he bought 9.2% of the company.
It could even be argued that Musk is vastly overpaying at $54.20 per share since TWTR closed trading at $39.31 on April 1st, the final trading session before Musk’s big reveal launched shares 27.12% higher that following Monday.
Still, many analysts believe it’s not enough. We’ll likely find out whether that’s true following the board’s “all hands meeting” with employees this evening. Until then, expect TWTR shares to remain coiled as investors await the conclusion to Musk’s latest conquest.
