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Twitter stock rockets as Elon Musk buys stake: what’s next?

By Joyanta Acharjee

14:15, 4 April 2022

The Twitter (TWTR) app as seen on a Smartphone screen
Twitter's stock has declined since founder Jack Dorsey left the company last November – Photo: Alamy

Billionaire businessman and Twitter (TWTR) celebrity Elon Musk has taken a stake in the social media outlet, sending shares soaring by 25% in mid-morning US trading on  Monday.

A US regulatory filing shows Musk acquired 73.49 million shares of Twitter, equivalent to 9.2% of outstanding shares and worth around $3.6bn (£2.75bn, €3.27) at current prices and making him the largest shareholder.

The size of the stake, combined with Musk’s past comments on Twitter’s policies, prompted speculation that he could be preparing to take an activist role and seek changes to Twitter’s direction or even management.

Last week the billionaire founder of SpaceX and CEO and “Technoking” of Tesla (TSLA) used the social media site to ask about Twitter’s approach to free speech and said he was considering creating a social media platform of his own.

Twitter (TWTR) five-year chartTwitter (TWTR) five-year chart
Musk recently used the social media site to ask about Twitter’s approach to free speechTwitter
Musk Tweeted he was considering creating a social media platform of his ownTwitter

Analyst reaction

With the stock price rising, one Wall Street analyst reckons Musk’s move has the potential for an ownership play.

“We would expect this passive stake as just the start of broader conversations with the Twitter board/management that could ultimately lead to an active stake and a potential more aggressive ownership role of Twitter,” Wedbush Securities analyst Daniel Ives wrote in a research note obtained by Capital.com.

The analyst was not concerned about Musk’s interest in Twitter leading to him "taking his eye off the ball" with Tesla/SpaceX.

“We will be following Musk's comments/future regulatory filings closely to see if Musk ultimately pursues further conversations with the Twitter board and/or goes to an active stake and above the key 10% threshold,” Ives wrote.

AMD

151.35 Price
-3.270% 1D Chg, %
Long position overnight fee -0.0263%
Short position overnight fee 0.0041%
Overnight fee time 21:00 (UTC)
Spread 0.11

NVDA

118.03 Price
-3.230% 1D Chg, %
Long position overnight fee -0.0263%
Short position overnight fee 0.0041%
Overnight fee time 21:00 (UTC)
Spread 0.11

GME

25.06 Price
-4.370% 1D Chg, %
Long position overnight fee -0.0263%
Short position overnight fee 0.0041%
Overnight fee time 21:00 (UTC)
Spread 0.14

TSLA

239.25 Price
-4.530% 1D Chg, %
Long position overnight fee -0.0263%
Short position overnight fee 0.0041%
Overnight fee time 21:00 (UTC)
Spread 0.14

As at 11:02 EDT (UTC-5) the stock was up 25% at $49.41 per share.

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Twitter profile

Since signing up on the social media platform in 2009, Musk has gained 80 million followers and is in the top ten of the most-followed people on Twitter.

Elon Musk is in the ten most followed people on TwitterWikipedia

Musk is so closely followed amongst cryptocurrency investors that his crypto-related Tweets are enough to move prices. His Tweets have required pre-approval from the SEC since 2018 after he settled charges with the SEC over old Tweets related to taking Tesla private.  

Late last year Musk also turned to Twitter to host a poll asking followers if he should sell 10% of his holdings in Tesla.

Musk also turned to Twitter to host a poll asking followers if he should sell 10% of his holdings in TeslaTwitter

Dorsey replacement

In November, Twitter founder and CEO Jack Dorsey stepped down suddenly with 10-year Twitter veteran and chief technology officer Parag Agrawal taking on role of CEO.

Dorsey had been in charge at both Twitter and payments company Block (SQ) (formerly Square), which he also co-founded, but institutional shareholders had been pushing for him to choose one over the other, according to a report from the UK’s Guardian newspaper.

Markets in this article

SQ
Block Inc (Extended Hours)
68.19 USD
-0.34 -0.500%
SQ
Block Inc (Extended Hours)
68.19 USD
-0.34 -0.500%
TSLA
Tesla Inc (Extended Hours)
239.25 USD
-11.34 -4.530%

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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