Twitter (TWTR) – Get Twitter, Inc. Report shares slumped lower Tuesday, providing Tesla (TSLA) – Get Tesla Inc Report CEO Elon Musk with another potential out from his stagnating $44 billion takeover bid as social media stocks tumble in the wake of Snap Inc’s (SNAP) – Get Snap, Inc. Class A Report surprise profit warning.
Snap, which makes the Snapchat messaging app, cautioned in a late Monday Securities and Exchange Commission filing that the group is likely to report sales and profits “below the low end of our Q2 2022 guidance range” thanks in part to a ‘deteriorating’ global economy that will hammer ad spending.
Social media groups have also cautioned that Apple’s (AAPL) – Get Apple Inc. Report Identifier for Advertisers (IDFA) privacy changes, which make it more difficult to track and target users with specific ads, have impacted both user growth and top line revenue gains.
Shares in Snap plunged nearly 30% in pre-market trading, pulling social media stocks of all description, including Twitter — which runs a revenue model that is nearly entirely comprised of ad sales — sharply lower.
Wedbush analyst Dan Ives said the Snap “disaster” not only reminds investors of the “have and have nots in tech”, but also could prompt a wholesale capitulation from Musk, who has already said he’s putting his Twitter takeover aspirations “on hold” amid a dispute over the size and scope of fake accounts on the micro-blogging website.
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“Snap disaster likely pushes Musk one step closer to the door or lower deal price in eyes of Street,” Ives aid Tuesday. “Twitter shareholder meeting tomorrow will be interesting as soap opera continues.”
KeyBanc Capital Markets analyst Justin Patterson, meanwhile, said the current ‘will-they-or-won’t they’ takeover saga “may act as a distraction and exacerbate brand advertising spend headwinds.”
Twitter shares were marked 3.4% lower in pre-market trading Tuesday to indicate an opening bell price of $36.55 each, a move that would peg its market value at around $28 billion, some 36% south of Musk’s ‘best and final’ offer.
Twitter reiterated its commitment to the proposed takeover — at $54.20 per share — in a Securities and Exchange Commission filing last week, while Musk told a conference in Miami that he could still be interested in acquiring the group at a lower price, despite his concerns over the number of so-called bot accounts on the platform.
Earlier this month, analysts at Hindenburg Research, a noted short-seller, cautioned that the deal could be ‘repriced’ if Musk threatens to walk away.
Hindenburg said Musk could pay the $1 billion break-up fee tied to the takeover and still come away with a better deal if he were to re-negotiate, noting his “significant leverage” over the micro-blogging website and the lack of a competing offer.