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Musk’s Latest Twitter Move May Not Be as Crazy as It Seems

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What would business journalists do without Elon Musk? It’s a Friday, after all, when business news tends to be scarce. So we appreciate Musk’s decision to liven up our day with his early morning tweets, declaring the Twitter acquisition to be “on hold” and then proclaiming his continued commitment to it. What’s going on? The simplest explanation is probably correct: Musk wants to cut the price, having realized he is massively overpaying. And he wouldn’t be wrong in thinking that.

Before Musk disclosed his Twitter stake in early April, Twitter shares were trading—as they had for a couple of years on average—at roughly half the forward sales multiple of Snap, a social media company of comparable size, according to Koyfin data. But in recent weeks, as Snap stock fell with the market while Twitter did not, the multiple on the two stocks has converged to the point where they’re nearly equal. Twitter stock would have to be trading around $24 to restore that historical relationship, which it would be if Musk walked away. If Musk were making his offer today, he might pay only around $28, including a premium. In other words, his original $54.20 price is nearly 50% too high.

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  • Source: https://www.theinformation.com/articles/musk-s-latest-twitter-move-may-not-be-as-crazy-as-it-seems

This Post was originally published on The Information

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