Twitter Surges as War with Musk Heats Up.

By Chris Stiles • Wednesday, July 13 16:25 • Permanent Link

Social media company Twitter (TWTR) surged 7.90% during normal trading hours to a price of $36.65, making it our gainer of the day. Twitter outpaced the NYSE and Nasdaq composite indices by 7.90% on a heavy day of trading with 40,267,700 trades compared to its average of 38,361,366.

Twitter’s main competitors in the social media sphere, Snap and Meta did not post significant moves. The day’s extreme price movements were due to investors seeing an arbitrage opportunity arising out of the ongoing acquisition talks between Twitter and billionaire Elon Musk, who agreed last month to purchase a majority of the company for $54.20 per share. Musk subsequently backed out of the deal, and on June 13 Twitter sued for its enforcement.

A ruling in Twitter’s favor raises the prospect of an instant profit at current share prices, so investors are piling in while the price spread is still wide. The spread between the market price and the $54.20 deal price of Twitter shares will continue to narrow as the deal becomes more certain, which will reduce the profit for late-comer investors. Conversely, if courts refuse to enforce the deal, the spread may widden significantly as the share price falls back down to lower levels.

Since January 03, 2022, Twitter is down 16.5%, outperforming both the S&P 500 and the Nasdaq 100 by 4.9% and 12% respectively. Over the last 6 months, Twitter insiders have purchased 1,912,847 shares over the course of 27 transactions, whereas only 599.643 shares were sold over 12 transactions. The company’s top shareholders are the Vanguard Group, Blackrock, and Morgan Stanley,

Twitter’s 12 month trailing Price to Earnings ratio is 141.35 compared to 11.94 for Meta and 39.91 for Pinterest. Twitter’s total revenue and gross profit are on an uptrend, however its free cash flow has been trending downwards since 2018. Free cash flow refers to the liquid capital available to meet operating costs and to payback investors. Debt levels are increasing but the company has not been subject to a recent debt rating downgrade.

Today, TWTR is trading 50% below its 52 week high of $73.34, and 21% below its average target price of $46.42. The average analyst rating is hold.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.