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Since Elon Musk agreed to purchase Twitter for $54.20 a share in April, the Nasdaq Composite has fallen 22%.
Justin Sullivan/Getty Pictures
Elon Musk plans to purchase
Twitter
for $44 billion, the unique worth he agreed to again in April. The world’s richest man is probably going wishing he waited just a few months to signal the contract.
When Musk, the co-founder and CEO of
Tesla
(ticker: TSLA), proposed shopping for
Twitter
for that $54.20 worth, some observers puzzled if Twitter would even settle for the supply. Twitter inventory traded at $39 on April 1, the Friday earlier than Musk disclosed a stake within the social media agency, however shares had traded as excessive as $68 in October 2021.
Now it seems like Twitter (TWTR) shareholders are getting the favorable deal, with Musk overpaying by a big sum.
Since Musk disclosed his Twitter stake—the beginning of his takeover journey—the
S&P 500
has fallen almost 17%. It’s even worse for tech shares: the
Nasdaq Composite
is down 22% over that point. Social media companies have struggled particularly. Shares of
Meta Platforms
(META), which owns Instagram and Fb, are down 38% since April 1, whereas shares of
Snapchat
mum or dad Snap (SNAP) are down 71%.
The sharp declines have adopted pullbacks in advertiser sentiment as manufacturers react to a worsening macroeconomic setting. Rising rates of interest, inflation, and the battle in Ukraine have additionally weighed on firms broadly.
Twitter inventory closed at $52 on Tuesday after Musk disclosed that he deliberate to shut his Twitter acquisition on the agreed-upon $54.20 a share worth.
On the deal worth, Musk is paying almost eight occasions the quantity of income Twitter is anticipated to generate over the subsequent 12 months. That compares with a gross sales multiples of simply thrice for Meta and three.6 occasions for Snap.
Put one other means, Musk is paying greater than double the present valuation of Twitter’s major rivals. At a gross sales a number of according to Meta and Snap, Musk can be paying extra like $24 per share for Twitter.
Tesla didn’t instantly reply to a request for remark from Musk.
Musk will likely be getting an organization that has handled appreciable uncertainty in current months, probably impacting worker retention and recruiting efforts. Analysts had frightened that if Musk efficiently received out of the deal, shares would plummet. As an alternative, will probably be Musk and his associates making an attempt to justify his $44 billion buy.
Write to Connor Smith at connor.smith@barrons.com