Twitter: Fun to Watch But Not to Invest

Elon Musk gave a TED presentation on Thursday in
Vancouver. Twitter questions begin 11 minutes in.

Elon Musk sucked the air out of the trading room on Thursday with his offer to buy Twitter at $54.20 per share.

Elon Musk went full-on corporate raider a week into his rolling clash with Twitter Inc., offering a $43 billion bid for the company and warning he might sell his stake in the service if rebuffed.

The Thursday offer was the latest in a will-he-or-won’t-he saga between the world’s richest person and the social-media service. The offer was at once serious—Mr. Musk disclosed it in a federal filing—and at the same time tinged with humor, as the offer was for $54.20 per share, a barely veiled marijuana reference...

The offer of $54.20 a share represented a 54% premium over the day before he began investing in Twitter, and a 38% premium over the day before his investment was publicly announced. Over the past year, Twitter’s shares have traded as high as $73.34.

The stock market currently values Twitter (TWTR) at about $35 billion. The platform's content attracts millions of eyeballs as a go-to place both for breaking news and unfiltered communication from entertainment, political, sports, and wealthy celebrities.

However, Twitter has struggled to "monetize" this popularity through ads or subscriptions. Today the stock trades 8% above its November, 2013 IPO close of $41.65, the worst return of any social media company.

Your humble blogger took a flyer on the stock back in 2016 when the price dipped to $16 per share. (See chart below.)

Twitter then, as now, had no earnings and a large footprint. But it had potential upside at $16 per share. A $10-$12 billion valuation in 2016 was a relatively inexpensive price to pay for a company to acquire a readily existing user base.

An acquisition never happened, but Twitter's visibility increased markedly from 2016 to 2020 because of President Trump. I sold one-third of the stake when the price had doubled to $33 in 2018 and got out completely at $54.20 (I like to sell and Elon likes to buy at that price) in February, 2021 after the Tweeter-in-Chief had been kicked off the platform.

It's going to be fun watching the proceedings between Elon Musk and Twitter, but I won't be buying into the stock at its current level. There's risk of a 25-30% drop if a deal doesn't go through, and a new investment would take the fun out of it.