Elon Musk proposes to buy Twitter for $54.20 per share.
If the deal is approved, Musk will likely have to sell some Tesla shares.
Tesla stock is already moving lower in premarket trading due to this risk.
Elon Musk Wants To Buy Twitter
Tesla's Elon Musk recently offered to buy Twitter for $ 54.20 per share, which is almost 18% off yesterday's closing price. The potential deal gives Twitter a total of $ 43 billion.
Not surprisingly, Twitter shares are very active in market trading. Currently, the stock earns about 6% and trades close to the $ 49 level.
Any agreement must be approved by the Twitter shareholders and the company board, and it remains to be seen whether they will be happy to receive $ 54.20 for each stock they have.
While Twitter stock traded lower at $ 31.30 in 2022, it reached a high level close to $ 81 back by 2021, so shareholders may decide that Musk's offer is very modest.
What's next on Twitter and Tesla?
Twitter stock currently trades below the price offered by Elon Musk, which is common in such cases as the deal may fail if it does not receive the required authorization.
Twitter analyst estimates have been steadily declining in recent weeks, and the company is expected to report earnings of $ 0.8 per share by 2022 and profits of $ 1.16 per share by 2023. So, Musk offers to buy Twitter at 42 forward P / E by 2023. This is not cheap, but, like many tech stocks, Twitter has been rich in recent years.
For Tesla investors, this agreement is important. If the agreement expires, Musk will have to receive cash to fund the purchase. Most likely, he will have to sell Tesla stock to fund the deal.
At the time Musk last sold Tesla stock, a pullback on Tesla shares was a tangible one. If he starts selling his Tesla shares again, the stock will probably find himself under pressure. In market trading, Tesla shares have fallen by almost 2%, which means that traders accept this risk.
It should be noted that the issue of taking Twitter can be long as Twitter shareholders are likely to try to find a better deal. With this in mind, it could remain a source of uncertainty for Tesla investors in the coming months.
