This article first appeared in the Morning Brief. Get the Morning Brief sent directly to your inbox every Monday to Friday by 6:30 a.m. ET. Subscribe
Monday, July 11, 2022
As my career has soldiered on, I have come to terms with one thing: rich, powerful people are going to do whatever they damn well please.
The reason for that is pretty simple — they have the money, connections, and the ruthless aggression to foster whatever reality they so desire.
This might sound cynical, but I have seen it time and time again. And now, everyone is seeing it firsthand with the world’s richest person, Elon Musk, backing out of his $44 billion deal for Twitter late on Friday.
Musk is terminating the merger agreement with Twitter because of what his team believes have been “material” breaches of multiple provisions in the agreement. Some of those provisions appear to include Twitter’s recent decision to can about a third of its recruiting team and not providing Musk with what he views as accurate data on “bots,” or fake accounts.
Twitter chairman Bret Taylor tweeted the company will take this to the courts to get Musk to close the deal or have him pony up the $1 billion breakup fee. Taylor declined to comment to me on the unfolding series of events. On Sunday evening, Bloomberg reported that Twitter has hired the legal heavyweights over at Watchell, Lipton to sue Musk.
A spokesperson for Twitter declined to make CEO Parag Agrawal available for an interview. (A quick aside: Agrawal has been bizarrely quiet since the merger news hit and it would be good for him to show some outward leadership to rally the troops as his company is essentially burning down to the ground.)
“This is a ‘code red’ situation for Twitter and its Board as now the company will battle Musk in an elongated court battle to recoup the deal and/or the breakup fee of $1 billion at a minimum. We see no other bidders emerging at this time while legal proceedings play out in the courts,” Wedbush analyst Dan Ives said in a note to clients following Friday’s news.
Ives cut his price target on Twitter to $30, and we expect other analysts on the Street to make similar moves this week.
To that end, here are eight reasons why Twitter’s stock is probably dead money for the foreseeable future following Musk’s iron fist slamming down on the social media platform:
Wall Street won’t trust Twitter’s operating metrics in light of the fake account debate.
Twitter’s advertising business will be hurt for a while due to Musk’s involvement.
The talent drain has opened at Twitter amidst the Musk debacle, impacting future product development.
There is a growing lack of confidence in new, unproven CEO Agrawal.
Twitter is now locked in a costly long-term court battle with the world’s richest person, which is not a great place to be.
No other bidders are likely to appear. For years, there was a view from investors that Twitter would eventually be acquired. That has to be completely removed from the equation.
Musk is likely to dump his nearly 10% stake in Twitter, which would pressure the stock price. Just the potential for this happening could weigh on the stock.
In one fell swoop, Musk has singlehandley destroyed a public company. Destroyed it because he has the money, connections, and the ruthless aggression to do it.
The blunt truth is Musk probably doesn’t give a damn that he has left a platform used around the world in utter shambles. It comes with the territory with people like Musk.
Now, if this disaster is good news for anyone, it could be Tesla (TSLA) shareholders.
Tesla stock has lost nearly 30% since Musk announced his deal to buy Twitter, and Ives thinks this deal going away could offer a relief rally for shares. The looming court battle between Musk and Twitter, however, will likely leave the Street wary about getting too fired up for either company’s prospects in the months ahead, in Ives’ view.
Happy Trading…and we wish you well trying to come back from the abyss, Twitter.
What to Watch Today
Yahoo Finance Highlights
BofA Securities maintains Amazon.com at ‘buy’ with a price target of $154.00
Six people in critical condition, one still missing after Paris blast – prosecutor
© Reuters. French firefighters and rescue forces work after several buildings on fire following a gas explosion in the fifth arrondissement of Paris, France, June 21, 2023. REUTERS/Gonzalo Fuentes
PARIS (Reuters) – Six people remained in a critical condition and one person was believed still missing on Thursday, one day after a blast ripped through a street near Paris’ historic Latin Quarter, the city’s public prosecution office said. “These figures may still change,” prosecutor Maylis De Roeck told Reuters in a text message, adding that around 50 people had been injured in the blast, which set buildings ablaze and caused the front of one to collapse onto the street. Of two people initially believed missing, one has been found in hospital and is being taken care of, the prosecutor said, adding: “Searches are ongoing to find the second person.” Authorities have not yet said what caused the explosion, which witnesses said had followed a strong smell of gas at the site. The explosion led to scenes of chaos and destruction in the historic Rue Saint Jacques, which runs from the Notre-Dame de Paris Cathedral to the Sorbonne University, just as people were heading home from work. It also destroyed the facade of a building housing the Paris American Academy design school popular with foreign students. Florence Berthout, mayor of the Paris district where the blast occurred, said 12 students who should have been in the academy’s classrooms at the time had fortunately gone to visit an exhibition with their teacher.
“Otherwise the (death toll) could have been absolutely horrific,” Berthout told BFM TV. She said three children who had been passing by at the time were among the injured, although their lives were not in danger.
4 big analyst cuts: Alcoa & DigitalOcean shares drop on downgrades
Here is your Pro Recap of the biggest analyst cuts you may have missed since yesterday: downgrades at Alcoa, DigitalOcean, Teleflex, and Xcel Energy.InvestingPro subscribers got this news in rapid fire. Never be left in the dust again.Alcoa stock drops on Morgan Stanley downgrade Alcoa (NYSE:) shares fell more than 3% pre-market today after Morgan Stanley downgraded the company to Underweight from Equalweight and cut its price target to $33.00 from $43.00, as reported in real time on InvestingPro.The firm sees a significant decline in consensus estimates, and as negative earnings revisions materialize, it believes the stock will face downward pressure and underperform.The analyst’s estimates for EBITDA in Q2, 2023, and 2024 are substantially lower than the consensus. The stock is currently trading above its historical average. The firm said its downward revisions in earnings estimates and price target are attributed to the company’s high operating leverage to aluminum prices.DigitalOcean stock plunges on downgradePiper Sandler downgraded DigitalOcean (NYSE:) to Underweight from Neutral with a price target of $35.00. As a result, shares plunged more than 5% pre-market today.The company reported its last month, with revenue beating the consensus estimate, while EPS coming in worse than expected. Furthermore, the company provided a strong outlook, which was above the Street estimates.2 more downgradesTeleflex (NYSE:) shares fell more than 3% yesterday after Needham downgraded the company to Hold from Buy, noting that UroLift expectations may still be too high.According to Needham, their checks indicate that urologists are reducing their use of UroLift due to its retreatment rates, reimbursement cuts, and increasing use of competing procedures. This is also supported by their Google Trends data analysis, which indicates decreasing search interest in UroLift.BMO Capital downgraded Xcel Energy (NASDAQ:) to Market Perform from Outperform and cut its price target to $64.00 from $69.00 to reflect the lower-than-expected terms of the company’s regulatory settlement in Colorado.Amid whipsaw markets and a slew of critical headlines, seize on the right timing to protect your profits: Always be the first to know with InvestingPro.Start your free 7-day trial now.
- Forex1 year ago
Forex Today: the dollar is gaining strength amid gloomy sentiment at the start of the Fed’s week
- Forex1 year ago
Unbiased review of Pocket Option broker
- Forex1 year ago
How is the Australian dollar doing today?
- Cryptocurrency1 year ago
What happened in the crypto market – current events today
- Forex1 year ago
Dollar to pound sterling exchange rate today: Pound plummeted to its lowest since 1985
- World1 year ago
Why are modern video games an art form?
- Stock Markets1 year ago
Morgan Stanley: bear market rally to continue
- Stock Markets11 months ago
Amazon layoffs news: company announces record layoffs