Market cap: USD 30.3 billion
Valutico Valuation: DCF USD 22,936 – 34.461 billion (WACC 8,7%)
Elon Musk buys 9.2% of Twitter for US$2.89 billion
The share price increased by 28% as a result
Musk could use his voting rights to put pressure on management to implement certain changes to the platform
Elon Musk bought a 9.2% stake in Twitter — Valutico Value Check
Elon Musk recently asked his 80 million followers on the short message service Twitter: “Freedom of speech is essential for a functioning democracy. Do you think Twitter strictly adheres to this principle?” The result of the poll will be important, the Tesla boss wrote, and people should please vote carefully. A good two million people voted. More than 70 percent answered “No”, whereupon Musk wanted to know: Do we need a new platform?
It is gradually becoming clear why he asked the questions. Since mid-March, Musk has owned 9.2 percent of Twitter’s shares, which equated to 2.89 billion US dollars. This is according to a filing Musk made with the US Securities and Exchange Commission (SEC) on this week. He could use the outcome of the vote and the large block of shares to put pressure on the board or Twitter’s new chief executive Parag Agrawal to implement certain changes to the platform.
The share price reacted promptly on Monday. On the New York Stock Exchange, the stock rose by almost 28 per cent to just over 50 dollars by late evening. Musk’s share is thus worth a good 1.2 billion dollars more than at the time of purchase. For the multi-billionaire, this should be insignificant. He is one of the richest people in the world, and the price of the Tesla share has a much stronger influence on his fortune.
The announcement will be yet another major test for new Twitter CEO Parag Agrawal, who replaced Jack Dorsey after he unexpectedly resigned in November 2021. Agrawal vowed to increase accountability, make decisions faster and to improve product execution. The company set ambitious goals for growth including increasing annual revenue to $7.5 billion and getting to 315 million daily users by the end of 2023.
In our Valutico analysis we came up with a value range of USD 22,936 – 34.461 billion, using DCF with a WACC of 8,7%. As you can see below, we calculated the discount rate using a levered beta of 0,72 and a risk free rate of 2.4%.
If you want to have a more detailed analysis, please click the link.