Elon Musk’s looming acquisition of Twitter has the potential to make him “immense amounts of profit”, one fund manager has claimed.
This morning Twitter confirmed its board had unanimously agreed to Mr Musk’s US$44 billion ($61 billion) offer to acquire the platform after he had acquired funding.
The deal means Twitter will become a private company, meaning investors will receive US$54.20 ($75.60) per share that they own.
Gareth Brown is the Co-Portfolio Manager for Forage Funds’ International Shares Fund, which has a stake in Twitter on behalf of Australian retail investors.
He describes Twitter as “the one that got away”, saying that despite the offer giving investors a “decent premium” Twitter never realised its true value as a public company.
“Musk has bought Twitter on a platform of delivering free speech to the world. With a bit of nous, he’s going to make immense amounts of profit too,” Mr Brown said.
“Likely hundred of billions of dollars. Unfortunately, our own investors will see almost none of it.”
Mr Brown said Twitter had a “gaping wide gulf” between its current value and the value it could be under ideal management and execution.
“Executing Twitter’s difficult turnaround after years of falling short of potential while paying out immense, undeserved riches to staff via stock based compensation? That’s now somebody else’s problem,” Mr Brown said.
“But more strongly, I feel disappointment. I’m disappointed that, over the years, the Twitter board couldn’t do more to exploit that colossal gulf in value between what Twitter is and what Twitter could be.
“And now, opting to hand the baton to Musk, that same board has done little to extract blood from the new owner to pay the old owners for all that unrealised potential.”
Since news of the deal went public Twitter’s stock rose by almost 6 per cent, ending trade at US$51.70.
Ben Laidler, Global Markets Strategist at social investment network eToro, said the surprising speed at which Twitter’s board accepted the offer likely means many felt Twitter’s stock was on the verge of a downward spiral.
“Such a quick capitulation by the Twitter board for a $54 per share bid, 30 per cent below the stock’s price high of last year, likely reflects the tough outlook for the social media sector and the only gradual turnaround impact of CEO Parag Agrawal,” Mr Laidler said.
“A successful Twitter bid may also raise concerns for Tesla (TSLA) shareholders, with its CEO becoming involved in yet another time-consuming venture and potentially selling down part of his 9.1 per cent stake, which is valued at over US$90 billion.”
It appears that time-consuming ventures are Mr Musk’s forte.
At present, the South-African born entrepreneur is the co-founder and leader of several companies including Tesla, SpaceX, Neuralink and The Boring Company.
Hi personal net worth as estimated by Bloomberg currently sits at US$257 billion ($357.71 billion), making him the richest man in the world by a gap of more than $120 billion – the equivalent GDP of European country Hungary.
It’s also important to note that Mr Musk’s net worth is not liquid – while he can buy anything for sale in the world, he does not have a single bank account with nine zeros after the figure.
His wealth is heavily tied into the stock options he owns in his own companies.