Musk support off Twitter board opens door to hostile takeover

Musk backing off Twitter board opens door to hostile takeover

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Elon Musk stops briefly and looks down as he speaks throughout an interview at SpaceX’s Starbase center near Boca Chica Village in South Texas on February 10, 2022.

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Billionaire Elon Musk’s turnaround of his choice to sign up with Twitter’s board unlocks to a hostile takeover and might cause extra volatility in the stock, according to experts.

Musk’s choice not to sign up with Twitter’s board implies he’s no longer restricted to owning simply 14.9% of the business. Now, lots of experts recommend the Tesla CEO might reinforce his stake and ultimately attempt and develop control.

“[T] his weekend’s change-up spares the business from needing to handle an abandoner director tweeting about board-level conversations. That would have been illogical,” Gordon Haskett Research Advisors’ Don Bilson composed in a noteMonday “The flip side to this is TWTR must deal with a wild-card investor that already owns 9% of the company and has the resources to buy the remaining 91%. As volatile as Musk is, we could see a move like that made shortly. Or we could never see it all. This overhang that TWTR now lives beneath certainly qualifies as a distraction.”

Bilson indicated Twitter CEO Parag Agrawal’s declaration revealing Musk would no longer sign up with the board, in which he alerted staff members of “distractions” ahead. Bilson informed CNBC in a phone interview Monday that the business’s messaging was “sort of ominous.”

Ultimately, Twitter might choose to swallow a “poison pill,” or an investor rights strategy to resist a hostile takeover. But Bilson composed such a step features the threat it “might anger Musk and perhaps it would be best for TWTR to keep that arrow in its quiver for the time being.”

“It’s going to be pretty hard to get committed to an investment thesis because you never know where the winds are going to flow,” Bilson informed CNBC. “I don’t think anything is off the menu with this guy.”

Wedbush Securities expert Dan Ives used a comparable belief on Monday early morning.

“This is clearly going to be an unfriendly situation,” Ives informed CNBC’s Andrew Ross Sorkin on “Squawk Box.”

“Instead of Musk in the boardroom in the corner just saying nay or agreeing on certain board candidates, I think now it really goes to the point that in the coming days I think we’ll start to see if he’s going to go more hostile, more active — that’s what the Street’s focused on,” Ives stated.

Twitter’s stock had its finest day given that its IPO after Musk’s more than 9% stake in the business ended up being public. It leapt an extra 2% the day after when the business exposed Musk would sign up with the board. Shares changed Monday and the unpredictability might continue.

“While it remains unclear what Mr. Musk’s priorities are, we do expect his tweets will receive increased attention, which could drive share price volatility,” KeyBanc experts composed Monday following the news.

But Loup Ventures Managing Partner Gene Munster stated on CNBC’s “Squawk Box” he believes “the majority of the drama is over.”

Munster stated he based that forecast on the presumption it would have been a smarter choice to choose the takeover right away if he planned to do that. He likewise stated he believes taking control of Twitter merely isn’t where Musk wishes to invest a lot of his time.

“Understand that there is something that is important to him around free speech and I think he wants to move that forward. Understand that he sees that as an opportunity as big as electrification and as big as space travel,” Munster stated. “But eventually I believe that this [is] simply one a lot of things on the plate for him to take control of.”

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SEE: Elon Musk still wishes to affect modification at Twitter, states Loup’s Gene Munster