Shares of Twitter (TWTR) jumped on Monday after Tesla's (TSLA) CEO Elon Musk revealed a 9.2% stake in the social media company. Commenting on the news, Wedbush analyst Daniel Ives said he would expect this passive stake as just the start of broader conversations with Twitter's board and management. Meanwhile, Gordon Haskett's head of event-driven research told investors that no one should sleep on the idea that Musk and Silver Lake might take Twitter private. The analyst highlighted in a research note that Silver Lake's Egon Durban is a Twitter director and that Silver Lake advised Musk when he was exploring the idea of taking Tesla private.
PASSIVE STAKE IN TWITTER: Elon Musk has purchased a passive 9.2% stake in Twitter, owning a total of 73,486,938 shares that are worth $2.89B based on the stock's closing price Friday. This makes him the largest outside shareholder in the stock and was disclosed in a filing with the SEC only shortly after the executive criticized Twitter and polled his more than 80M followers on Twitter's free speech principles. "Given that Twitter serves as the de facto public town square, failing to adhere to free speech principles fundamentally undermines democracy. What should be done?," Musk said in a tweet. "Free speech is essential to a functioning democracy. Do you believe Twitter rigorously adheres to this principle?," the executive asked in a poll he posted on March 25.
The filing with the SEC indicates that the date of the event that triggered the disclosure of his stake in Twitter was March 14. Late last month, on March 26, Tesla's CEO had also said he was "giving serious thought" to building a new social media platform after claiming Twitter doesn't allow free speech.
'EYE POPPING' REGULATORY FILING: Commenting on what he called an "eye popping" regulatory filing, Wedbush analyst Daniel Ives told investors that he would expect this passive stake as just the start of broader conversations with the Twitter board and management that could ultimately lead to an active stake and a potential more aggressive ownership role of Twitter. For Tesla purposes, he views this move as Musk just further building out his tentacles and is not worried in any way around Musk "taking his eye off the ball" with Tesla/SpaceX. The analyst has an Outperform rating and a price target of $1,400 on Tesla's shares.
Meanwhile, Gordon Haskett's head of event-driven research, Don Bilson, highlighted that Elon Musk had help from Goldman Sachs (GS) and received advice from Silver Lake when he was exploring the idea of taking Tesla private in 2018 in the context of the disclosure that Musk has accumulated a 9% stake in Twitter, where the PE fund put $1B two years ago. "Keep in mind that Silver Lake's Egon Durban is a [Twitter] director. That connection seems relevant today and we don't think anyone should sleep on the idea that Musk and Silver Lake might take [Twitter] private," stated Bilson, who added that he views Musk's involvement in Twitter as "sort of a Ryan Cohen move on steroids."
PRICE ACTION: In Monday morning trading, shares of Twitter have jumped $10, or over 25%, to $49.33.
