While some investors are taking their profits now, others are holding out for further gains before the transaction is finalized.
Fans of Elon Musk who are interested in following him on Twitter Inc. will not be able to do so. As a result of the $44 billion deal to take the social media behemoth private that was struck by the inventor of Tesla Inc., ordinary investors will no longer be able to hold Twitter as a publicly-traded company.
Despite this, a large number of people cheered Musk's triumph, either because he has increased the value of their investments thus far or because they believe he would modify the social media platform so that it is more in line with the values that they hold.
Twitter announced on Monday that shareholders will be entitled to a payment of $54.20 for each share that they now possess once the transaction is finalized, which is anticipated to take place at some point during this year. In New York on Tuesday morning, trading of the stock was roughly $4 lower than the offer price, which is an indication that investors see some danger that the takeover would not go through as planned.
A number of investors who rushed into Twitter when Elon Musk initially started talking about purchasing the site are now selling their shares in order to lock in the profits they have made thus far. The stock price has increased by over 30 percent since April 1, which was the last trading day before Elon Musk declared that he had a large stake in the company.
Others are sitting on the sidelines, watching events unfold in the hopes that the stock price will increase before the transaction is finalized, or in the event that the sale will not go through as expected. Erik Smolinski, a 31-year-old man who resides in California and operates a trading YouTube channel, said that he had "locked profits in" in order to remove his risk.
A week ago, in response to the news about Musk, he bought three positions in long calls that were really deep in the money for Twitter. He has now sold around half of the position, but he is holding onto the other half in order to observe how the stock moves from here on out. He is going to sit tight until the real buyout is completed or until the underlying stock reaches the offer price of $54.20, whichever occurs first.
He stated that the fact that the offer had been accepted did not guarantee that everything would go without a hitch. "This is a technique to make money while simultaneously reducing risk and keeping the potential for forward return."
When he was first offered the job, he accepted it due to his admiration for Musk and his perception that "the stuff that the person touches tends to do well."
There are differences of opinion among people. Many Twitter users have expressed fear that Musk's vow to alter content-moderation regulations could lead to an increase in harassment on the network, which has caused the arrangement to be met with mixed reactions from Twitter users. Early on Tuesday, the hashtag #RIPTwitter started trending on various social media platforms.
Snir David, a retail trade analyst from Israel who is 29 years old, has already liquidated his position in response to the news. It had been approximately a year since he had made his initial investment in Twitter, and at the time, the stock was selling for $39. Most recently, Twitter accounted for roughly 25 percent of his overall portfolio.
He stated, "I believe that Elon's purchase is a really wonderful thing," and I agree with him. "If there is only one owner of the company, there is no one else who can make the necessary changes to the management or take the appropriate steps for the company. His capacity to do so has significantly improved, and I very much appreciate it.
David determined that the reward would not justify the danger of keeping the shares for any longer. He indicated that he had no interest in participating in the "arbitrage game."
According to Mike Bailey, director of research at asset management company FBB Capital Partners, there is a limited upside for investors who are still banking on Twitter as a stock despite the company's recent performance.
He explained, "There is a possibility of a negative outcome in this scenario if the authorities decide to veto the transaction or if some other issue arises." "Long-term investors might want to consider the possibility of purchasing shares in other companies."
The statements made by Musk that he intends "to retain as many stockholders as is allowed by the law in a private firm" are probably also contributing to the confusion that has been sown.
Some people might have taken this to suggest that even when Twitter becomes private, individual investors will still have the opportunity to participate in the company. However, the fact of the matter is that after the transaction is finalized, it is highly possible that only the most significant investors would possess a portion of the company.
Kim Forrest, chief investment officer at investment management Bokeh Capital Partners, responded to Musk's statements by saying, "He means the big fish." "Everyday people like you and me are not included. People do not always fully comprehend the fact that after something has been bought with cash, they can no longer take part in it as an owner.
Because of this, Patrick Questembert, who is 57 years old, decided to sell his position. On Tuesday morning, the New York resident dealer sold all 20,000 of his shares in Twitter, which he had been holding onto.
"As of right now, the game is done, and the price is forecast to creep up to $54.20 over the course of the next several weeks unless something unexpected happens," Questembert added. Given the nature of the deal, there is no possibility of maintaining investment in Twitter."
According to Max Gokhman, chief investment officer at money management AlphaTrAI Inc., purchasing Twitter shares at this time is not an intelligent move at all.
"There is an upside of less than 5 percent right now, and there is still a potential that the deal may not close due to the fact that there are frequently unforeseen shocks when Elon is involved," he said. "I do not believe that it is a wise decision for retail to get in at this time."
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