Tesla, Inc. TSLA CEO Elon Musk’s quest to take over Twitter, Inc. TWTR hit a roadblock after the social media platform’s board decided to adopt a shareholder right’s plan, aka poison pill. An analyst at Wedbush looks into the options ahead for the Tesla CEO.
The Tesla Analyst: Daniel Ives maintained an Outperform rating and $1,400 price target for Tesla shares.
The Tesla Thesis: The poison pill will likely limit Musk’s ability to accumulate more than 14.9% of the company’s stock on the open market and also give Twitter’s Board a chance to find another buyer, analyst Ives said.
The analyst said he expects the poison pill to be challenged in the courts, making it an elongated process that will move to the background.
“This all now becomes “a game of high stakes poker” between Musk and Twitter’s Board, with this upcoming week likely to be an eventful one as we expect to formally hear from both parties on their next move in this M&A battle for Twitter,” Ives said.
Ives said he now sees three paths for Musk from moving forward Firstly, Musk can formally lay out his financing strategy and vision for Twitter in a letter and make a presentation to the board and shareholders, the analyst said. Given the Street is skeptical on the bid, the Tesla CEO may have to give more details to get more investors on board and increase the pressure on the board, he added.
Alternatively, Musk can find a strategic partner and increase the bid toward $60, which is currently seen as a more appropriate level by many Twitter shareholders, the analyst said. Bringing a deep-pocketed private-equity partner, according to the analyst, will help lighten Musk’s burden and also increase the attractiveness and viability of the bid in the eyes of shareholders.
As a third approach, Musk can sell his stake and exit his position, Ives said. However, the analyst said he views the scenario as unlikely.
Recalling Oracle Corporation’s ORCL 2003/2004 bid for PeopleSoft, which was overseen by Musk’s friend and Tesla board member Larry Ellison and took 18 months for consummation, Ives said the former may take inspiration and decide to more aggressively draw this Twitter battle out.
Tesla Price Action: Tesla closed Friday’s session down 3.66% at $985.
Photo: Courtesy of TED Conference on Flickr