Twitter stock drops 7% after Elon Musk put deal on hold
If you wentbbled up the Twitter TWTR, stock on the news that Elon Musk would be paying $54.20 a share to acquire the social media company and take it private, Friday is living up to its reputation.
The world's richest man set his sights on the company despite the fact that investing experts have been urging caution for anyone who is eyeing potential profits in a short-term market play.
After Elon Musk tweeted on Friday morning that his deal to buy social media for around $44 billion was temporarily on hold amid a review to check that spam and fake accounts are a sliver of Twitter users, Twitter's stock price fell sharply.
The stock was reeling in pre-market trading after Musk s 5: 44 a.m. tweet. Two hours later, Musk said he was still committed to acquisition. Following a Thursday market close at $45.08, investors didn't seem to be reassured, with Twitter share prices hovering around $41.78 Friday morning, around $41.78, a roughly 7% decline. There was no immediate response from Twitter to a request for comment.
According to FactSet data, Twitter's trading volume has hit crescendos throughout the month of April, during key points in the story of Musk's bid. On April 4, there were 269.2 million shares traded, the day news broke that Musk had acquired a 9.2% stake in Twitter. The data shows that 12.1 million shares were traded on the day before, according to FactSet.
By late morning trading Friday, there were already 56.21 million shares traded, well above the 65 day average of 50.13 million shares traded per day, according to MarketWatch data.
For weeks before Friday s plot twist and the rocky slide down for the stock market, financial planners and stock market experts said it was tempting to buy the Twitter stock on the assumption that its final sales point would be $54.20 per share. After all, that would have yielded a tidy profit from around mid-April onwards when the stock was trading around the mid- and upper $40 s.
They advised against the possibility that the deal wouldn't go through, and it was worth remembering the risks of such a move. The stock price didn't stay at the $54.20 offer price at the time when Musk and Twitter said there was a definitive agreement, they noted.
Individual investors can express their opinions about the probability of the deal s closing, but realize that there are professionals who do little other than assess these variables, Steve Sosnick, chief strategist at Interactive Brokers IBKR, previously told MarketWatch in late April.
Sosnick said at the time that these professionals were already heavily involved in the pricing and positioning of the Twitter deal.
Many professionals may be blindsided on Friday. According to analyst Dan Ives, of Wedbush Securities, Musk injected a whole new level of uncertainty on the deal by turning the Twitter circus show into a Friday the 13th horror show.
There is already a $1 billion break-up fee that could apply to either Musk or Twitter if the deal doesn't materialize, according to SEC filings.
The stock of Twitter was down almost 4% year-to-date as of Friday morning. The stock was up about 19.6% year-to-date at one point in late April.
The Dow Jones Industrial Average DJIA was down nearly 11% and the S&P 500 SPX was down nearly 16% as it veered toward a bear market.