It could soon be curtains down for the Twitter, Inc. TWTR buyout drama that began in early April.
2 Reasons Why Twitter May Cave In: Following a Bloomberg report that suggested Twitter's board has re-engaged with Tesla, Inc. TSLA CEO Elon Musk and an agreement could be reached as soon as Monday, Wedbush analyst Daniel Ives said it now appears that Twitter hasn't hit it off with any other potential private-equity buyers.
"While the Board approved the poison pill which essentially gave them time to find a 'white knight' and second bidder," the analyst said.
Secondly, Twitter‘s first-quarter earnings report due after the market close on Thursday isn't likely to be positive enough, heaping further pressure on the company to find a partner, the analyst said.
Way Forward For Twitter: Twitter's board is likely to reject Musk's bid this week, Ives said. Twitter could then be facing a hostile tender offer from Musk as early as this week, the analyst said. The Tesla CEO could also partner with a PE partner for financing the transaction once negotiations officially begin, he added.
"The Street will read this news today as the beginning of the end for Twitter as a public company with Musk likely now on a path to acquire the company unless a second bidder comes into the mix," the analyst said.
Musk May Not Have To Heavily Liquidate Tesla Stock: The amended filing with the SEC showed that Musk may have to shell out $21 billion in equity financing from his Tesla/SpaceX holdings, which will be a fraction of the Tesla CEO's current holding in the EV company, the analyst noted.
Part of the $21 billion stock likely to be used for financing the proposed buyout could be used as collateral, the analyst said. Musk can ultimately pay this tranche in a number of ways, he added.
The $25 billion worth of awards Musk is eligible to receive following last week's quarterly results could essentially pay for Twitter equity financing itself, the analyst said.
"We do not believe this Twitter bid will result in a major sale of Musk's Tesla shares, instead being used as pledged shares for the loans obtained by Musk," Ives said.
Ives has an Outperform rating and a $1,400 price target on Tesla shares.
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