Twitter May Want to Close Musk Deal Ahead of Earnings Report: Analysts

SpaceX founder Elon Musk reacts at a post-launch news conference after the SpaceX Falcon 9 rocket carrying the Crew Dragon spacecraft lifted off for an unmanned test flight from Kennedy Space Center in Cape Canaveral, Florida, USA, to the International Space Station. March 2, 2019.

Mike Blake | Reuters

Twitter may want to finalize an acquisition deal with Elon Musk ahead of the company’s Q1 earnings report on Thursday, analysts said.

The social media giant is reportedly close to a deal with billionaire Tesla and the CEO of SpaceX. According to Bloomberg and Reuters, a deal could be announced as early as Monday, although there’s still a chance it could fall apart.

The company was expected to provide an update when it released its latest financial results on Thursday, if not sooner. Still, a disappointing quarter could be a catalyst for the company to close a deal with Musk.

“Finding a deal today or tomorrow may sound pretty enticing to someone who knows they have bad news,” Gordon Haskett said in a statement Monday. Musk is offering $54.20 per share while the stock was trading just above $50 as of Monday morning.

Wedbush analyst Dan Ives told CNBC on Monday that advertising models are slowing and subscriber growth remains a challenge. A challenging macroeconomic environment could weigh on results, KeyBanc said in an April 14 note. The company has banned advertising in Ukraine and Russia due to the war, and any weakness in ad spending in Europe could also affect second-quarter guidance, according to a note from MKM Partners earlier this month.

“Twitter is reporting earnings that are unlikely to be rainbows and smiles later this week, putting further pressure on the company regarding this high-stakes poker game with Musk’s upcoming bid,” Ives said in a Sunday note.

CNBC’s Jim Cramer agreed, adding that he doesn’t expect the company to post a good quarter. “I think they almost have to take the deal,” Cramer said on Squawk on the Street.

The company had set an ambitious internal goal of reaching 315 million monetizable daily active users by the end of 2023 and at least doubling its annual revenue this year. Wall Street was skeptical about this growth target, according to a statement from Loop Capital on Monday.

That makes it “more difficult for the board to argue that TWTR’s risk-adjusted, long-term fundamental value significantly exceeds Musk’s current offering,” the firm said.

Musk, an avid Twitter user, has argued that the company needs to be privatized in order for it to transform into a free speech forum.

Twitter declined to comment on a possible deal on Monday.

Subscribe to CNBC on YouTube. Twitter May Want to Close Musk Deal Ahead of Earnings Report: Analysts

Jane Marczewski

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