TWTR Slides After Report Musk, Twitter Have Not Yet Reach Agreement To End Litigation

Update: for all those who sold TWTR stock yesterday, congrats.

Smart https://t.co/cFGl1816Vu

— zerohedge (@zerohedge) October 4, 2022

To everyone else, the rollercoaster is back, with Reuters reporting that – shockingly –  there is actually no deal actual deal to end the litigation:

ELON MUSK, TWITTER LEGAL TEAM HAVE NOT YET REACHED AGREEMENT TO END LITIGATION – SOURCES FAMILIAR WITH THE LITIGATION

As a reminder, one of the conditions Musk required for the deal to go through at its original terms, was for trial to be adjourned. And now that appears to be a hang up.

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Following Tuesday’s Musk shocker which sent Twitter stock soaring more than 20%, TWTR has slumped in premarket trading with shares nearly 106% below Elon Musk’s $54.20 offer price as analysts point out the “unknowns” surrounding the transaction. While they expect the deal to go through, further challenges lie ahead for Musk as he will now need to fix the social media firm’s issues.

Courtesy of Bloomberg, here is a snapshot of sellside reactions:

MKM Partners (neutral, PT $48)

“If both parties agree (again) on the proposal, a trial would be averted, and Twitter could potentially cease to be a public company by the end of next week”
However, this isn’t a done deal “as there are no guarantees that Musk would still follow through with his proposal and close the transaction”

Stifel (hold, PT $30)

This is yet another surprising twist in the ongoing back and forth between Twitter and Musk, “but it’s likely the last change of course”

If Twitter’s next phase does not include some form of advertising, that might be a marginal positive for some social platforms like SNAP and PINS

Citi (neutral, PT raised to deal price of $54.20 from $40)

While there are still some unknowns around the transaction, the deal “is now likely to close which is also likely to improve overall operations going forward”

Wells Fargo (equal weight, PT $54.20)

Musk embarking on significant changes to TWTR supporting more expansive speech rights, could likely have a negative impact on brand advertising spend
Marketers could then reduce brand spend on the platform and redeploy experimental ad budgets on emerging short-form and long-form video advertising platforms like TikTok, META’s Reels, GOOGL’s YouTube Shorts, SNAP’s Spotlight, PINS’ Idea Pins

Morningstar

Under Musk, Twitter could “experience mixed reactions from large advertisers who likely will assume the content on the platform will become even more heavily weighted toward politics”
On the other hand, Musk’s strong following could benefit TWTR’s subscription revenue model

Wedbush (neutral, PT raised to deal price of $54.20 from $50)

The deal will mostly likely close in the next few weeks “with minimal speed bumps to overcome once the Twitter Board officially accepts and removes the lawsuit in Delaware Court”
Buying Twitter was “the easy part of this deal,” the hard part will be fixing it with monetization and subscriber engagement

Truist Securities (hold, PT $43)

While the take-out price is a material premium to peers, “relative to expectations and to peers, TWTR’s results in 2Q22 trailed materially”
“With the deal effectively concluded, the heavy lifting is next”
Musk will now have to fix the “business, which has been challenged across products, ad formats and user engagement”

Baird Equity Research (neutral, PT $54)

Raising our price target to reflect the intention to consummate the deal

CFRA (hold, PT raised to $54 from $42)

The deal could close “very soon”
“Musk’s first order of business will need to be focused on repairing a damaged employee base and finding the right leadership team”

Of course, the situation remains fluid and as we said yesterday…

How long until Musk changes his mind this time

— zerohedge (@zerohedge) October 4, 2022

… Musk may change his mind at any moment.