Elon Musk's Twitter Stake Could Boost Cryptos, Devalue The Stock (Or Both)
Andy Hecht | Apr 13, 2022 08:20AM ET
This article was written exclusively for Investing.com
- Elon Musk buys around a 9.2% stake in Twitter
- Jack Dorsey founded Twitter
- Musk is a crypto devotee
- Dorsey believes Bitcoin will change the world
- Eccentric and brilliant billionaires can address custody, security, and acceptability for the asset class
The news that Elon Musk, the world’s wealthiest individual, worth over $200 billion, bought a significant stake in Twitter (NYSE:TWTR) caused the stock of the social media platform to explode higher.
Musk is an innovator. He made millions off of PayPal (NASDAQ:PYPL), which he co-founded, and is making billions from Tesla (NASDAQ:TSLA), the electric vehicle company he founded and of which he's the chief executive officer. He also owns SpaceX and the Boring Company, along with other businesses.
At first blush, Twitter may seem to be a more synergistic investment for media-focused billionaires like Jeff Bezos, who founded Amazon (NASDAQ:AMZN) and owns the Washington Post, or Rupert Murdoch, the owner of Fox News (NASDAQ:FOX) and its related companies. However, Musk has something in common with Twitter’s founder and former CEO, Jack Dorsey, which provides a different kind of synergy.
Both men have been huge supporters of cryptocurrencies. If the two work in tandem, including by using Dorsey's internet innovation, it could kick-start the next step in the evolution of the cryptocurrency revolution.
Musk buys around a 9.2% stake in Twitter
Elon Musk has never been shy about sharing his opinions and Twitter has been his preferred social media platform to do so. Last week's news that Musk had acquired over 9% of TWTR’s outstanding shares and was planning to take a seat on the company's board of directors caused the stock to vault higher.
Source: Barchart
The chart highlights TWTR shares closed at $39.91 on Apr. 1. The next week, the stock moved to a high of $54.57, a 36.7% gain. TWTR was at the $44.48 level at the close on Apr. 12.
And just to keep the market guessing, it seemed, on Sunday, Musk backtracked on his decision to take a seat on Twitter's board. However, the move has eliminated a regulatory limit of a 14.9% ownership stake and opened the potential for a hostile takeover of the company by Musk. At the $44.48 level, TWTR’s market cap was near the $34 billion level, easily affordable for the billionaire with assets over $200 billion.
Jack Dorsey founded Twitter
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Jack Dorsey is the co-founder of Twitter as well as the founder and CEO of Block (NYSE:SQ). Last year, Dorsey relinquished his CEO role at TWTR to concentrate on SQ, his payments company. Block has been working on a cryptocurrency wallet.
On the news of Musk’s investment in TWTR, Jack Dorsey said :
“I’m really happy Elon is joining the Twitter board! He cares deeply about our world and Twitter’s role in it. Parag (TWTR’s current CEO) and Elon both lead with their hearts, and they will be an incredible team.”
Parag Agrawal, Mr. Dorsey’s successor, said:
“I’m excited to share that we’re appointing @elonmusk to our board! Through conversations with Elon in recent weeks, it became clear to us that he would bring great value to our Board.”
Musk has been critical of TWTR, suggesting the social media platform fails to “ .”
His enthusiasm for the burgeoning asset class is equal to Musk's. Late last year Dorsey changed Square’s name to Block and left Twitter because of his passion for the cryptocurrency asset class.
Dorsey believes Bitcoin will eventually replace the US dollar. He also thinks it will “unite a deeply divided country (and eventually world).”
Eccentric and brilliant billionaires can address custody, security, and acceptability for the asset class
Elon Musk and Jack Dorsey are not ordinary business tycoons. Significantly, they also share some other things in common. They have billions at their disposal, have created companies that changed the world, are crypto devotees and have massive egos.
They're both iconoclasts as well: wizard.
Working together, these two brilliant men could potentially solve the custody, security, and acceptability issues that now plague the cryptocurrency asset class. Moreover, by cooperating they could further the evolution of social media, addressing the many roadblocks created over the past years.
Alternatively, they may face off in an epic battle for control of Twitter, creating a clash of titanic egos that could drive volatility in TWTR shares without any real breakthroughs for a greater good.
Musk and Dorsey make quite a pair, but the potential for an exponential result comes alongside the possibility of destructive risk. It could be all of this is a giant joke to the two of them, though investors are waiting on tenterhooks to find out.
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