Here’s what a typical buyout looks like on a stock chart…
Typically after a deal‘s announced, the stock price jumps to the buyout price. Then it continues to trade in a tight range near that price until the deal is complete.
And here’s Twitter’s (TWTR) chart…
Notice the difference? There is no tight range…
And the share price is nowhere near the buyout price.
Elon Musk’s Twitter deal is exciting to watch. A private citizen taking a public company private rarely happens.
I’ve been watching the drama unfold. It’s a learning experience for almost everyone involved. And I’ve noticed the mainstream media has consistently misled the public.
Starting with Musk’s initial purchase of Twitter stock…
1. They Called Musk’s Twitter Stake “Passive”
The real story began before anyone knew Elon had bought a single share of TWTR.
In late March, Musk conducted a poll on Twitter…
He told his followers, “The consequences of this poll will be important.” He instructed them to “vote carefully.”
In early April, a filing revealed Musk bought about 9% of Twitter’s stock.
The media, including Bloomberg, CNBC, Barrons, Mint, and The Street labeled his investment “passive.”
They reasoned that the form used to disclose the purchase was only supposed to be used for a passive investment.
If they were writing a high school research paper I’d give them an A+.
But they were writing for the best-known media outlets in the world. And they failed to provide context…
SEC compliance is not something Musk is well-known for. Anyone who follows Musk is aware of this fact.
And he started poking the bear weeks before the disclosure.
Trading For Keeps was one of few that got the story right. Here’s the editor’s comment:
“We read the filings ourselves and made a conscious decision to exclude the word ‘passive’ from our report.”
And, of course, the day after the stake became public, Elon was invited to join Twitter’s board.
Board members are not “passive” investors…
And while Elon’s board membership didn’t come to fruition, the media kept missing the mark.
2. They Called The Buyout a Done Deal
On April 25th, Twitter announced its intention to sell to Musk.
The $44 billion deal, if it goes through, will pay shareholders $54.20 per share in cash.
There was little discussion about the stock’s price after the announcement.
For some reason, the market didn’t price the shares at $54.20. And yet the media continued to report that the deal was sealed.
This takes me to the next thing the media missed…
3. They Ignored Twitter’s Stock Price
As we saw in the charts above, Twitter’s chart doesn’t look like a typical buyout.
If the deal were a sure thing, the price would have jumped up near $54.20 and traded in a very tight range until the deal closed…
But that’s not what happened.
What was the market pricing in?
We don’t know. A lawsuit challenging the deal’s legality has just come to light. That could have something to do with it.
Once again, Trading For Keeps saw something was off. They reported that the “stock is strangely trading more than $2 below” the buyout price.
And they took action. Liquidating half their position at $52 and disclosing the sale to their subscribers.
“I exited half my position at $52.”
Numbers don’t lie. Remember that as we explore my next grievance…
4. They Said The World’s Richest Man Couldn’t Afford It
On May 5th Musk announced another $7 billion in new funding commitments from 19 investors.
Elon’s net worth is nearly $250 billion. He sold about $8 billion in Tesla (TSLA) stock and has $21 billion in other commitments.
Musk is the most successful entrepreneur ever. He can raise capital. To the reasonable observer, it’s a foregone conclusion…
And yet the media reports that he might not be able to come up with the funds…
The New York Times even suggested banks may be unwilling to loan Musk cash against his Tesla stock because it’s “risky.”
Musk has secured the funding. And suggesting that he wouldn’t be able to was nonsense for the sake of clickbait.
The last screw-up is the media’s worst offense…
5. They Wasted Your Time
Every single media outlet, blogger, and commentator has an opinion about Musk, Twitter, or the politics of the situation.
They write things that sound important. They love to reference “people with knowledge of the situation.”
But the research has been virtually non-existent. And they consistently fail to bring context to the situation.
Look, I have opinions too…
But you don’t care about my opinions.
You care, rightfully so, about the facts.
And that’s why we started the 1-Minute Market Brief.
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