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Twitter: Musk To The Rescue

Apr. 04, 2022 4:19 PM ETTwitter, Inc. (TWTR)META, PINS, SQ51 Comments


  • Elon Musk acquires more than 9% of Twitter.
  • The company has long struggled with growing ad revenues inline with Facebook in part due to executives not actually using Twitter.
  • The stock is cheap at 5x forward EV/S targets with the potential for the business to accelerate growth to match the influence of the social platform.
  • The potential exists for Musk to buy the stock at a higher price, but that isn't the base case here.
  • This idea was discussed in more depth with members of my private investing community, Out Fox The Street. Learn More »
Elon Musk Visits Germany

Maja Hitij/Getty Images News

The biggest news of the day was Elon Musk acquiring 9.2% of the struggling social media site. The news that Musk apparently wants to take a crack at improving Twitter (TWTR) is an encouraging move considering the

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This article was written by

Stone Fox Capital profile picture

Stone Fox Capital (aka Mark Holder) is a CPA with degrees in Accounting and Finance. He is also Series 65 licensed and has 30 years of investing experience, including 10 years as a portfolio manager.

Mark leads the investing group Out Fox The Street where he shares stock picks and deep research to help readers uncover potential multibaggers while managing portfolio risk via diversification. Features include various model portfolios, stock picks with identifiable catalysts, daily updates, real-time alerts, and access to community chat and direct chat with Mark for questions. Learn more.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of TWTR either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (51)

Stone Fox Capital profile picture
This is my problem with Musk. He doesn't really appear to have a play.

-Elon Musk appeared to hint at a possible tender offer for Twitter (NYSE:TWTR) in a tweet on Saturday.

-Musk tweeted "Love Me Tender" in a cryptic tweet on Saturday that is not only a famous Elvis Presley song but also may refer to a potential tender offer directly to shareholders he could make for the social media platform that he offered to buy for $43 billion on Thursday.
Stone Fox Capital profile picture
Inadequate proposal.

-Tesla (TSLA) founder Elon Musk is offering to buy Twitter (NYSE:TWTR) for $54.20 per share in cash, Bloomberg reported Thursday.

-Twitter shares are up 12% in premarket trading.

-"Twitter has extraordinary potential. I will unlock it," Musk said in an amended 13-D filing.
Stone Fox Capital profile picture
Thoma Bravo might make a bid as well. IMO, $TWTR really isn't for sale with the new CEO and the subscription plans.

Stone Fox Capital profile picture
$TWTR CEO tweets that Musk won't join the board after all. Thoughts?

Musk's TWTR obsession is a distraction for SQ shareholders. Every braincycle he spends trying to impose his vision for this company is one he isn't using to further Block's opportunities. It also fuels the constant brouhaha over his persona, his integrity and his ambition.

If Elon spent the same amount of energy on, say, nailing down permanent raw material sources for TSLA's products, investors would be better served. Bezos was a model for two decades about how CEO's can exert huge influence while stating out of the limelight.
Stone Fox Capital profile picture
Think you got Musk and Dorsey confused. Musk has nothing to do with Square and Dorsey isn't focused on Twitter anymore.

$TSLA shareholders may be better served by Musk focusing on raw materials for Tesla, but it sure doesn't benefit Twitter shareholders. $TWTR shareholders want him involved, so this opinion isn't going to get much play here.
Just saw a new filing from Vanguard, did Vanguard up the amount of shares they own? Appears they are the largest shareholder now....

Stone Fox Capital profile picture
10.3% so apparently they like Musk on board. Could provide a huge voting block here.
Stone Fox Capital profile picture
The fact some employees are concerned about free speech on the platform is rather disturbing. As a shareholder, Twitter should not be biased towards one political party.

-Some Twitter (NYSE:TWTR) employees have expressed concern over the company's future, including its ability to moderate content, as Elon Musk has joined its board of directors, Reuters reported.

-On Monday, Musk disclosed he purchased a 9.2% stake in the Parag Agrawal-led company. One day later, the company announced that Musk, the world's richest man, would join its board of directors and his ownership stake would be capped at 14.9% as long as he is on its board.
Stone Fox Capital profile picture
Odd take by MKM to downgrade $TWTR with Musk. In his CNBC interview, he states incorrect data about Twitter users... odd stuff!

@Stone Fox Capital - you should expect analysts to continue to try to put a lid on the stock price (and even pull it back) while they get their own clients into it. Many were caught flatfooted by Musk. It’s hard to see $100 right now. But 70/75 by the end of the year seems very realistic again.
Stone Fox Capital profile picture
that would be illegal... 😬
@Stone Fox Capital - Yeah. Driving 60 mph in a 55 zone is illegal too. Yet I see it every time I’m on the highway. 🤷🏼‍♂️
This price pop is way too emotionally driven. While still not close to the 52 week high, this stock will correct. If you decide to buy, you should do so with an eye to jump out quickly. I'm talking only a few days at the latest. Besides the fanfare of the Elon Musk purchase circus, there isn't much of value in this stock to keep it aloft for very long. Beware.
@wwaizen if you are so sure about it, go short bigly, and make fortune.
Stone Fox Capital profile picture
You aren't going to like the pre-market move to $53 on Musk being appointed to the board.
Musk taking this big a surprise step is a game changer for TWTR shareholders. Market will continue to speculate on future prospects on what this step from Musk means for the Twitter as a company. Short sellers will be afraid to short and speculators will keep on making new bid, may drive stock price up further. It is going to be interesting to see how this plays out and what will be next step from Musk and from Twitter itself.
Stone Fox Capital profile picture
The next move is Musk buying up to 14.9% of the company awaiting the management team to execute. Hopefully they will. If not, he'll probably make his next move to buy the company or shakeup management. This is why a new day exists.

-According to the filing, Musk will be a Class II director and his term will expire at the company's 2024 annual shareholder meeting.

-The filing also added that as long as Musk is on the board of directors, his ownership stake will be capped at 14.9%.
Militiades profile picture
Dumped Twitter after they cancelled Trump. The lack of free speech on the platform is something I can't support. Especially since Twitter isn't a visionary company. We'll see if Musk has some ideas.
r Negoro profile picture
@Militiades Dorsey ruined this company.
Stone Fox Capital profile picture
@r Negoro
Dorsey created the company. He definitely used it for his social justice efforts and not to reward shareholders.
@Militiades ah man... dumping Trump was the best thing Twitter (and FB) ever did.
Go Elon Smart move if you can't fight them buy them
Stone Fox Capital profile picture
@Vincent Larosa
Think it was a smart move to focus on adjusting the $TWTR business versus trying to build a competing platform. The solutions at Twitter are simple and Jack left the company completely open by not maintaining a larger stake. Now, the new CEO has to produce or shareholders can force him out.
Millennial_Tyler profile picture
The self-induced political controversies are only part of the problem. The app and company is almost exactly the same as it was when it first started, that's the biggest issue I've seen. Almost every move they have made since the beginning days has really hurt them but I don't think its all that hard to fix.

-Start first by opening up the APIs again and the algos for "trending" topics. The appeal to me was the organic nature topics trended. Now its completely manipulated and not accurate.
-Also creating tiers of membership is one way to reduce trolling/bots/hate speech and to monetize the product better.
-Get completely out of content filtering and give the power to do that to the end user (better filtering capabilities either by words, topics, verified locations, custom groups etc..)

Once they do a few of these things and quit targeting conservative viewpoints they will be on a path for higher multiples like the other social media companies. As of now they are simply begging to be disrupted but the base product is so good its given them a lot of time to fix it. Eventually that will go away, it always does.
@Millennial_Tyler They do not filter *conservative* viewpoints; they filter communications that could lead to harm, which have a better home on Gab. Let that back and the monetization opportunities will crater, destroying revenue.
@Millennial_Tyler Great ideas. I hope Elon is listening.
@Swatti10 - They filter out information that doesn’t suit their agenda. Two glaring examples are the Covid Lab Leak and Hunter Biden’s laptop stories. Those stories, which have turned out to be quite legitimate news stories, could have and would have driven large levels of engagement. Large levels of engagement drive monetization higher, not lower.
Great observations on lack of executive engagement. That should get fixed now. Twitter is way too important to be languishing where it's been for years. Way undermanaged and now the greatest business manager of our times is even more involved and incentivized.
Stone Fox Capital profile picture
@Rearden Steel 2112
It's absurd how little some of the executives use the platform. The CEO and Chairman should be fired for the lack of interaction with Musk the last couple of weeks.
@Stone Fox Capital On the list of reasons they should be fired, lack of interaction with Musk is maybe a top 10 reason.
Stone Fox Capital profile picture
At least they placed him on the board. Though, the lack of interaction until today just proves they don't understand the platform.
Started a short position today
Stone Fox Capital profile picture
Why? When has shorting Musk worked?
@Stone Fox Capital Musk is extremely overrated and arrogant. I did okay shorting Musk/Tesla…could have made more if I was long. But I do believe many Musk believers will loose a lot of money in future. Let’s see what happens.
@spk9784 - Invest or don’t. But the one thing I would not do right now is short this stock. Twitter is too important in a much larger game. What happens if, say, Jeff Bezos decided to fight Musk for control of the platform? He does own the Washington Post after all. The only clear winner in that fight would be the shareholders.
Stone Fox Capital profile picture
Dead silence is the exact problem with Twitter. Not sure the executives even understand how the service works or the power included. The CEO should've had his own Twitter poll to see whether the answers to the Musk poll were biased to his followers. Either way, he should've taken the opportunity to interact with Musk. After all, it only drives the conversation and usage to the platform.

100 next month
Stone Fox Capital profile picture
No reason for $100 so quickly, but a good CEO would already have the stock at $100.
r Negoro profile picture
I loaded some while it was 35 ish.
It has some good potential growth imo. Just need to increase arpu.
OMG finally 'edit' option is here. It just shows how useless jack dorsey was.
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