By Nigam Arora & Dr. Natasha Arora
Signal(s) to enter, add, reduce, exit, hold or change.
Twitter (TWTR) is long from $15.37 and is in the Core Model Portfolio. Musk has offered to buy all of TWTR for $54.20 in cash. TWTR is trading at $49 as of this writing in the premarket.
TWTR has become the 173rd Arora Portfolio company to receive a buyout offer. This is an unrivaled record. Long-time subscribers to The Arora Report have made a fortune from our propensity to identify companies that get bought out. Here are the key points:
- If it was not Elon Musk but a traditional buyer, here is how it would have played out:
- $54.20 would have been the starting bid.
- Other bidders would have emerged.
- There would have been a bidding war.
- The ultimate offer would have been much higher.
- Musk is not a traditional buyer and as such poses risks to investors. Musk has said that he is “not playing the back-and-forth game.”
- Financing is anticipated but not locked in.
- The offer is marked as ‘best and final offer.’
- Musk has the right to withdraw the offer at any time.
- Musk is threatening that if his offer is not accepted, he would need to reconsider his position as a shareholder.
- The danger is that Musk could simply sell his shares at a profit and walk away.
- In such an event the stock will fall into the $30s.
What To Do Now
This is an unpredictable situation with no historical precedence and a wide range of outcomes. Therefore it comes down to personal preference.
Those with a highly diversified portfolio and willing to take the risk may consider continuing to hold.
For tracking purposes, the position will continue to be held without any profit taking.
Those who do not have a well-diversified portfolio or do not want to take risks may consider taking partial profits.
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This post was just published on ZYX Buy Change Alert.
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Nigam Arora
Nigam Arora is known for his accurate stock market calls. Nigam is a distinguished master of the macro. He is a popular columnist with over 100 million page views, an engineer, and nuclear physicist by background. Nigam has founded two Inc. 500 fastest growing companies and has been involved in over 50 entrepreneurial ventures. He is the developer of Theory ZYX of Successful Change Management and is the author of the book on Theory ZYX, as well as the developer of the ZYX Change Method for Investing.
Dr. Natasha Arora
Dr. Natasha Arora has significant expertise in investment analysis especially biotech, healthcare, and technology. Natasha is a graduate of Harvard Medical School followed by a postdoc at MIT. She has published several peer reviewed research papers in top science journals.
