Shares of Twitter Inc. rocketed toward their biggest-ever gain Monday, after it was disclosed that Technoking of Tesla Elon Musk had acquired a large stake in the social media company.
ran up 27.1% in very active early midday trading, putting it on track for the highest close since Nov. 17, 2021. It is also on course for the biggest one-day percentage gain since it went public in November 2013. The previous record rally was 21.4% on Sept. 23, 2016.
Trading volume ballooned to about 153.5 million shares, enough to make the shares the most actively traded on major U.S. exchanges, and compared with the full-day average of about 17.6 million shares.
In a Schedule 13G filing with the Securities and Exchange Commission, which implies a passive stake, Tesla Inc.
Founder Musk had acquired 73.49 million shares of Twitter, or 9.2% of the shares outstanding.
At Friday’s closing price for Twitter shares of $39.31, Musk’s stake would be worth $2.89 billion. At current prices, that stake would be valued at about $3.67 billion.
Musk has been under close scrutiny by securities regulators, following his August 2018 tweet about having “funding secured” to take Tesla private. More recently, the SEC subpoenaed Musk and the electric vehicle market leader regarding oversight of Musk’s tweets, which Musk believes is “inequitable” and blocks his First Amendment rights.
Wedbush analyst Dan Ives said it has been thought that given his “long-standing critical view of Twitter and social media platforms,” it was believed that Musk could look to build a competitor to Twitter and other social media platforms. “Instead, it looks like Elon has his eyes laser set on Twitter,” and Ives expects Musk to start conversations with Twitter management that could lead to a more active stake “and a potential more aggressive ownership role of Twitter.”
Musk’s 9.2% stake would make him Twitter’s largest holder of common shares, according to FactSet data, which shows Founder and board member Jack Dorsey with a 2.3% stake.
Musk’s investment comes as Twitter’s stock has started to recover recently after a tough 2021, relative to its peer group and the broader stock market. Twitter’s stock has now gained 15.6% year to date, and was trading 54.1% above its 20-month closing low of $32.42 on March 7. In 2021, Twitter shares had tumbled 20.2% while the SPDR Communications Services Select Sector exchange-traded fund
rallied 15.1% and the S&P 500 index
had run up 26.9%.
Elon Musk is currently listed as the world’s richest person, with a total net worth of roughly $273 billion, according to the Bloomberg Billionaires Index, as Tesla’s stock has gained 7.0% so far this year after soaring 49.8% last year.
Tom Siomades, chief investment officer at AE Wealth Management, said investors in the past were mostly non-emotional, but he feels today’s investors believe they are owed more than just a rate of return.
“Musk is an extension of that, he feels that Twitter is infringing on free speech, and he probably wants to have an impact,” Siomades said. “He will use his money, power and prestige to exact change at the company.”
Think, People for the Ethical Treatment of Animals (PETA) buying stocks of companies they believe mistreat animals, so they can attend those companies’ annual meetings and submit shareholder resolutions.
Cornell University’s Alexandra Cirone, assistant professor of government, said Musk may have learned something from Donald Trump, that it’s better to invest in a social-media app than trying to launch one from scratch.
“Breaking into the social media market is tough, and the recent failure of [Trump’s] Truth Social to successfully launch might have demonstrated to Musk that it’s more profitable to invest in existing platforms,” Cirone said.