Shares of Twitter Inc (NYSE:TWTR) surged Tuesday after it was reported that Tesla Inc (NASDAQ:TSLA) CEO Elon Musk is resuming his planned buyout of the social media platform.
Here's why one Twitter analyst is saying the news isn't too surprising.
The Twitter Analyst: Wedbush analyst Daniel Ives has a Neutral rating on Twitter with a $50 price target. The analyst’s price target is “Musk deal dependent.”
Related Link: Hot Take: Twitter Investors Should Buy The Dip Amid Whistleblower Allegations
The Twitter Takeaways: Ahead of a highly public and potentially length court case, Musk is reportedly returning to his planned $44-billion buyout of Twitter that values the company at $54.20 per share, which he proposed in April and backed out of in July.
“This is a clear sign that Musk recognized heading into Delaware Court that the chances of winning vs. Twitter board was highly unlikely and this $44 billion deal was going to be completed one way or another,” Ives said Tuesday.
The analyst said agreeing to complete the original deal avoids “a long and ugly court battle.”
Wedbush sees "minimal regulatory risk" in the deal, "although now Musk owning the Twitter platform will cause a firestorm of worries and questions looking ahead among users and the Beltway," he said.
A trial is set for Oct. 17 after Twitter sued Musk for walking away from the acquisition and Musk countersued the company.
“This is a smart move for Musk to go ahead with the deal given the legal hurdles that were ahead into Delaware,” Ives said.
In August, Ives argued the Twitter whistleblower could be a potential win for Musk, as the Street was factoring in Twitter having a clear win in the court case.
Ives said the whistleblower situation at Twitter “adds complexity” to the court case.
The analyst previously said the possible outcomes of the Twitter lawsuit were:
1. Deal ends, Musk pays $1-billion breakup fee and walks away.
2. Musk forced to buy Twitter at $54.20.
3. Musk settles with Twitter and pays damages ranging from $5 billion to $10 billion.
4. Musk wins court case and pays no breakup fee.
Ives' suggestion that a potential deal could avoid a “brutal Game of Thrones battle in Delaware” appears ready to come true.
TWTR Price Action: Twitter shares were trading 12.67% higher at $47.93 Tuesday afternoon before trading was halted pending news.
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