Shares of Twitter Inc (NYSE: TWTR) are down roughly 10% on Monday after Elon Musk announced plans of quitting his $44 billion takeover deal with the social network.
Twitter shares could tank another 65%
More alarmingly, though, a Rosenblatt analyst says the stock could be worth $11 only if Musk indeed gets to walk away from the buyout agreement. On CNBC’s “Squawk on the Street”, Barton Crockett said:
If you don’t get the deal, Twitter could be an $11 stock. That’s based on a 90% plus decline from 52-week high, which would be at the height of what peers have done; also reflects that the business has been meaningfully disrupted.
Twitter drives more than 85% of its revenue from “advertising”. The looming recession, therefore, could be another major headwind for the stock moving forward.
Could Musk win the court fight?
Twitter says it will pursue legal action to enforce the billionaire into buying the company at the agreed upon $54.20 a share. Crockett, however, cautions that the court fight might just lean in favour of Elon Musk.
Twitter has a history of restating DAUs. It hasn’t told Musk precisely how it calculates the spam accounts. So, it suggests that maybe they don’t want that out there. So, there’s reason to be concerned.
The CEO of Tesla Inc must pay $1.0 billion in break-up fee if he chooses to exit the deal. Many expect the recent development to be a tactic he’s using to negotiate a lower price. TWTR currently trades at a PE multiple of 138.
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