Elon Musk, the richest man in the world, acquired Twitter for $44 billion in a deal that made the news today. The publicly held social media platform is now privately owned.
Despite the huge cost of acquiring Twitter, Elon Musk said the acquisition is neither about money nor business in most of his narrative. However, the fact remains that there is always a business motive for every entrepreneurial investment.
Here are 3 things Elon Musk can stand to gain from acquiring Twitter.
An increased valuation as Twitter shares will soar
One of the reasons Twitter’s board of directors eventually sold the company is the dwindling value of the company’s stock.
According to Ben Laidler, Global Markets Strategist at social investing network eToro, the unusual quickness with Twitter’s board accepting the offer suggests they believed Twitter’s stock was on a downward spiral.
However, after acquiring 73,486,938 shares, a 9.2% stake, Twitter’s stock soared by more than 27%.
On Monday, the stock soared throughout the day as a deal with Elon Musk became more eminent. After the announcement of the acquisition, the stock rose 6% to $51.70 per share.
Breaking into the new lucrative market
With the acquisition of Twitter, Musk is stepping into a new market worth billions of dollars. Think of it as new grounds to break for the world’s richest man.
According to the data from Research and Market data, the global social networking platforms market was valued at $192.950 billion in 2019. It is expected to increase at a CAGR of 25.38% by 2026, reaching $939.679 billion.
Make Twitter more profitable
Gareth Brown, Co-Portfolio Manager at Forage Funds which owns a stake in Twitter on behalf of Australian retail investors, calls Twitter “the one that got away”.
He claims that despite the “decent premium” offered to investors, Twitter never realised its actual value as a public company. To him, there was a “gaping huge chasm” between Twitter’s current worth and what it might be if it was managed and executed well.
“As such, “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.
Musk has bought Twitter as a platform for delivering free speech to the world. With a bit of nous, he will also make immense amounts of profit”.
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