Analysts Bet On Twitter Deal Getting Done After Elon Musk Goes On Another Tesla Stock Selling Spree

Zinger Key Points
  • Although Musk called the Twitter deal as "hopefully unlikely," analysts increasingly believe the deal will get done.
  • The most likely scenario, according to Wedbush's Ives, is the court enforcing the Twitter deal at the original price.
  • Musk may also be forced to cough up $5 billion to $10 billion in damages.

Elon Musk on Tuesday disclosed in six filings that he sold $6.85 billion worth of Tesla, Inc. TSLA shares on Aug. 5. He later took to Twitter to clarify that the disposals were a preemptive move to mobilize funds to finance a “hopefully unlikely” Twitter, Inc. TWTR deal, if it is enforced and some equity partners don’t come through.

“It is important to avoid an emergency sale of the Tesla stock,” he added.

Analysts, however, had a different take on it.

Elon Wants It: Black: At this point it is clear that Musk wants to buy Twitter and that both parties are willing to settle for a lower price, rather than going through the tedium of a trial, Future Fund founder Gary Black said on Twitter.

Black is in the camp of those who are opposed to Musk taking Twitter private.

A poll Black ran on Tuesday ahead of the disclosure of Musk’s stock sale overwhelmingly returned the response that renegotiating a lower price is the most likely outcome of the deal. He suggested a likely cut back to $50-$51 per share

Black is a Tesla bull and his firm’s flagship fund The Future Fund Active ETF FFND has Tesla as its top holding.

Read on to know whether Tesla shares will run in the run-up to the stock split taking effect

Chances Of Twitter Deal More Likely: Dan Ives Although Musk said in late April he is done with his Tesla stock sale, the situation has changed dramatically, heading into a Delaware Court trial scheduled for October, Wedbush analyst Daniel Ives said.

The Street believes that the odds are stacked against Musk winning the legal fight, the analyst said.

Given the higher chances of the Twitter deal going through, the analyst raised his fair value estimate for Twitter shares from $30 to $50.

“We can also see Musk trying to resolve this powder keg situation before the Twitter deal officially heads to court in October,” the analyst said.

At a minimum, Twitter will get a massive settlement in the $5 billion to $10 billion range that is starting to be factored into the stock, he added.

Ives sees the following scenarios likely playing out:

  • Deal terminated and Musk pays a $1 billion breakup fee
  • "Specific performance" upheld by the court, forcing Musk to buy Twitter at $54.20/share
  • Musk having to settle or pay significant damages to Twitter, likely ranging from $5 billion to $10
  • Musk winning in Delaware and paying no breakup fee

Ives has a Neutral rating on Twitter shares.

In premarket trading Wednesday, Tesla stock was soaring 3.06% to $876, according to Benzinga Pro data.

Photo: Created with an image from Daniel Oberhaus on Flickr

Market News and Data brought to you by Benzinga APIs
Price Target
Posted In: Analyst ColorM&ANewsTop StoriesAnalyst RatingsTechDaniel IvesElon MuskGary Black
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!