stock has lost its perch and hasn’t found a safe landing spot yet.
tweeted early Friday morning that his deal to buy the social network is “temporarily on hold” pending details of how the company calculates its user base.
His tweet linked to a May 2 article by Reuters about how spam and fake accounts make up less than 5% of Twitter’s reported daily active users, which was based on figures from the company’s 10-Q filing that day—a boilerplate disclosure included in all of Twitter’s quarterly and annual flings since the company went public in 2013.
Two hours later, Mr. Musk tweeted, “Still committed to acquisition.” But the damage has been done: Twitter’s shares were down about 8% by midmorning to around $41.46, which is only about 5% above the price the stock fetched before Mr. Musk disclosed on April 4 that he had taken a sizable ownership stake in the company. That turned out to be a prelude to an offer to buy the company outright the following week that culminated in a deal announced April 25 to pay $54.20 per share in cash.
Twitter’s stock was already about 17% lower than that at Thursday’s close—an unusually wide spread reflecting growing skepticism that Mr. Musk will go through with the transaction, at least at the agreed upon price. But latching onto the long-disclosed issue of fake-versus-real users—a murky issue that hangs over every social media platform—is odd. Regardless, the world’s richest mind changer might use the issue to either negotiate the deal price down or as a pretext for walking away completely, with uncertain legal consequences.
In the latter case, Twitter’s shares would almost certainly decline more—possibly a lot more.
Consider that since April 1, the S&P 500 has slipped 12% while the Nasdaq Composite has fallen by 18%. Internet stocks have fared even worse, with the Nasdaq CTA Internet Index off 24% in that time.
—the parent companies of online advertising titans Google and Facebook—have lost 17% and 12% of their values, respectively, in that time while Snapchat-parent
has plunged by 35%.
Absent Mr. Musk’s bid, Twitter likely would have succumbed to the same forces of gravity. The company’s first-quarter revenue reported April 28 fell a bit short of Wall Street’s projections despite a surprising jump in daily active users. Online advertising is broadly under pressure from the combined weight of rising inflation, supply-chain challenges and the war in Ukraine.
The industry also is still digesting changes
made to its mobile operating system last year that make user tracking more difficult. There is also the growing competitive force of TikTok, which has quickly become the third-most used social media app, according to a survey by Edison Research.
A drop that merely mirrored the Nasdaq Composite from Twitter’s pre-Elon level would put the stock at less than $32 a share—about 23% below where it was changing hands Friday morning. And the stock could fare even worse than its peers since losing the deal would focus an even sharper light on Twitter’s internal turmoil. Mr. Musk still could go through with the deal, but it was hardly a sure thing from the beginning. It looks like even less of one now.
Write to Dan Gallagher at [email protected]
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