A Wall Street analyst expects “fireworks” between Tesla CEO Elon Musk and Twitter’s board at the social media giant’s upcoming annual shareholder meeting on Wednesday.
“Twitter will hold its annual shareholder meeting this Wednesday and will surely set off more fireworks between Musk and the Twitter Board,” Wedbush Securities analyst Dan Ives wrote in a note to clients Monday evening. “The elephant in the room at Twitter’s shareholder meeting will clearly be the price of Musk’s $44 billion deal for the company with shareholders encouraged by the board to vote in favor of it. signed agreement.”
Although Twitter’s board accepted Musk’s $54.20 per share offer to take the company private, the deal is now temporarily on hold as the billionaire has asked the company to show how it calculates an internal estimate that spam and fake accounts account for less than 5% of platform users.
Musk, who said the deal “cannot move forward” until transparency is assured, estimated that spam and fake accounts could account for at least 20% of the platform’s users.
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Twitter CEO Parag Agrawal said in a May 16 thread that it would be difficult to conduct an external review to determine the percentage of spam and fake accounts on the platform “given the critical need for ‘use both public and private information’.
“Our estimate is based on multiple (repeating) human reviews of thousands of accounts, which are randomly sampled, consistently over time, from *accounts that we count as mDAUs*. We do this quarterly, and we’ve been doing it for many years,” Agrawal noted. “Each human review is based on Twitter’s rules that define spam and platform manipulation, and uses both public and private data (for example, IP address, phone number, geolocation, client/browser signatures, what the account does when active…) to make a determination on each account.”
In the first quarter 2022Twitter’s monetizable daily active user (mDAU) base grew 15.9% year-on-year to 229 million, including 39.6 million daily active users in the US and 189.4 million users international daily assets.
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Although Musk’s acquisition of Twitter is currently should close in 2022, the stock is currently trading well below its bid.
He told the All In tech conference in Miami earlier this month that a viable deal for Twitter at a lower price wouldn’t be “out of the question.” However, Twitter said it was “committed to completing the transaction at the agreed-upon price and terms as quickly as possible.”
“If the deal is renegotiated behind closed doors, the actual deal price of $54.20 will likely be significantly lower than the mid-$40 in the eyes of the street,” Ives predicts. “That said, we believe shareholders will clearly raise this burning issue at this week’s meeting, as Twitter’s Board of Directors strongly believes the deal is closed and subject to shareholder approval. regulatory authorities and shareholders.”
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If Musk backed out of the deal, he would have to pay a $1 billion severance fee and could face additional lawsuits for damages.
“We believe there is currently a 60% chance that Musk will try to walk away and use this spam account issue as a scapegoat to get out of the deal and a 40% chance that the Twitter board and Musk achieve a new price in the coming weeks,” Ives added.
He pointed out that accepting a lower offer from Musk would be a better alternative than standalone status, citing major market pressure for tech stocks coupled with Snap’s recent “disaster” quarter. Additionally, he noted that the Twitter deal was a “major overhang” on Tesla shares and that Musk needs to make a decision quickly on whether to walk away, renegotiate or move forward with the current deal. as investors’ patience runs out.
Wedbush Securities currently has a “neutral” rating on Twitter stock, with a 12-month price target of $54 per share, and an “outperform” rating on Tesla stock, with a 12-month price target of $1,000 per share.
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