Elon Musk’s TWTR Purchase:
News broke earlier this morning about Elon Musk taking a 9.2% stake in $TWTR — Twitter Inc. This stake in Twitter is equivalent to 73,486,938 shares and is worth $2.89B as of the market close on Friday. This news sent the TWTR stock soaring in premarket trading as Twitter is currently up 24%. This large increase now makes Elon’s position worth approximately $3.6B, adding $700M to Elon’s net worth.
Furthermore, this acquisition has made Elon one of the biggest stakeholders in the company (Elon has a higher stake than Jack Dorsey, who founded the company). This purchase comes as somewhat of a surprise, as he was recently asked his followers if they think a new (social media) platform is needed for free speech.
Elon’s Other Holdings:
Looking at Elon’s holdings and past stock purchases could help us have an idea on the potential impact of this transaction. However, Elon has never really purchased any stocks on the open market before, as he currently only holds TSLA ($244B worth, 231.7M shares), TWTR ($$3.6B worth, 73.5M shares), and Education Realty Trust Inc ($48k worth, 7,583 shares).
As you can see, Elon has not previously purchased many stocks, and even when he has, he has had very small positions in them. As a result, it is hard to tell what kind of impact this will have in a longer timeframe.
Elon’s Influence on Twitter Moving Forward:
I could see Elon Musk having some influence on the shape of Twitter moving forward due to this large stake. Furthermore, I believe that we will see Musk push for Twitter to enable free speech (as he has alluded to in prior tweets). If this happens, I think it would be fantastic for Twitter. The reason I think this is due to stocks like $DWAC and $CFVI>.
$DWAC is set to become Truth Social Inc, via a SPAC merger. Truth Social is a social media platform that is backed by Trump with the aim to deliver free speech to the community on their platform. This offering has attracted many investors, which has been represented in the price of $DWAC going from $10/share, to now $54.85/share. Since Musk’s acquisition, DWAC has fallen more than 13% in the pre-market. This is why I think TWTR enabling free speech would be great, because we can already see TWTR eating up the market share of other social platforms (like DWAC) that offer free speech.
$CFVI is set to become “Rumble Inc.”, also via a SPAC merger. Rumble Inc. made waves as a social platform during the pandemic as they were the first/only platform to offer completely free speech to their users. This came at a time when people were divided, and social platforms were restricting information about the pandemic, politics, and other categories. Since Musk’s acquisition, CFVI is down a little over 2%.
Elon’s Impact on Stocks and Crypto:
Over the past couple of years, we have bared witness to Elon Musk’s impact in the crypto world, tweeting multiple times about Bitcoin and Dogecoin, which had impacts on the prices of each cryptocurrency. Namely, Elon played a huge role in generating interest in Dogecoin, taking it from $0.09 to $0.74. However, this was in the crypto space, which is unregulated and wildly different than the stock market.
Furthermore, in January of 2021, Elon Tweeted “Use Signal”. Elon was referring to the Signal app, which offers an encrypted messaging to their users. Signal is owned by the Signal Foundation, which is NOT a publicly listed company. However, this did not stop Elon hungry stock traders as they bought up “Signal Advance” stock, which trades under the ticker “SIGL” on the OTC markets. SIGL has no relation whatsoever with Signal or the Signal Foundation, yet stock traders sent the SIGL stock up 6,350% in 3 trading days. Once again, we cannot apply this to Twitter, as SIGL is a very small-cap stock with an $18M market cap. This makes it significantly easier for the stock to experience large increases and is the reason it was able to gain upwards of 6000%. However, this rampage was still able to add over $1b worth of market cap to their company.
Overall Thoughts on Musk’s TWTR Stock purchase:
I think that the current premarket price is inflated due to Musk’s overall sway/appeal in the markets. As a result, I think that TWTR is going to fall in the short term. However, I do believe that the future of TWTR can be a bit brighter if Elon can influence TWTR to have, more favourable policies regarding free speech on their platform.