Musk/Twitter: Bizarre stock offering creates sentiment instead of value
#MuskTwitter #Bizarre #stock #offering #creates #sentiment Welcome to InNewCL, here is the new story we have for you today:
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The meme stock phenomenon is not over yet. It just migrated. In 2020 and earlier this year, zombie companies like GameStop inspired retail investors to rally on social media and then send stock prices skyrocketing.
Elon Musk can apparently create a similar sentiment on Twitter. The app is now privately owned by the billionaire entrepreneur and institutional investors. Its value has fallen since the $44 billion purchase price, hurt by the advertising slump and Musk’s erratic leadership.
Few CEOs could wipe out an investment so quickly. Musk himself, for example, has repeatedly considered bankruptcy. But the Musk Circus has both approving and disapproving audiences. Perhaps that alone can temporarily turn the natural laws of finance upside down.
As if to prove it, Musk has marketed more equity. Even more remarkable is that this has generated some interest.
Musk and co-investors provided $33 billion in equity to fund the original deal. That was one of the reasons banks lent $13 billion. The so-called “equity cushion” was developed to absorb the loss of value before the debt. The latter is now on the balance sheet of Morgan Stanley and others and is being offered at 60 cents on the dollar. This means that the equity cushion that potential equity investors want to build up has already been burned.
Typically, new investors could just buy Twitter debt at a discount and take over the company. That would leave little reason to consider buying common stock, let alone at the takeover price.
But maybe buying stock really just represents a chance to attend an annual meetup with Musk, get a verified account, and earn other psychic benefits that come with being a member of his club.
Musk could, if he wanted to, just give Twitter’s keys to his creditors. Tesla shareholders would like to have his attention again. Instead, he’s selling billions of dollars in shares in the automaker, seemingly to support Twitter.
It seems the billionaire is also willing to burn irrational money to stay in the clique of which he is a leading member.
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