Elon Musk Moves to Close Twitter Purchase at $54.20 per Share

According to various publications including Bloomberg and CNBC, Elon Musk notified Twitter yesterday that he will go through with the purchasing of Twitter (TWTR) for $54.20, above our standalone Twitter fair value estimate of $44 (and above the FactSet consensus estimate of $40). This was confirmed later by Musk’s 13D filing. Trading in the stock was halted for some time. We are raising our valuation of Twitter to $54.20 as the likelihood of either side now stepping away from the transaction is minimal. According to CNBC, the deal could close by the end of this week. As we mentioned in our July note, we think there are various reasons why Musk came back to the table and stuck with his original offer as he and his legal team likely saw the upcoming court battles against the firm unwinnable and/or very costly.

While Twitter is different from most social media platforms, this deal indicates that discounts given to stocks like Meta, Pinterest, and Snap relative to our fair value estimates are not warranted. Based on FactSet consensus estimates, Musk is purchasing Twitter for 7.4 times and 34.1 times 2023 sales and adjusted EBITDA, respectively. Five-star-rated Meta (META) is trading at 2023 sales and adjusted EBITDA multiples of 2.6 and 6, respectively. The faster-growing Pinterest (PINS) is trading at 4.1 and 25.2 times while Snap (SNAP) is at 2.9 and 19.4 times, respectively. Our fair value estimates for Meta, Pinterest, and Snap remain at $346, $46, and $27, which represent price/fair value estimates of 0.41, 0.54, and 0.39, respectively.