What happened
Shares of Twitter (TWTR +0.00%) charged sharply higher to start the week, surging as much as 26.6%. As of 10:47 a.m. ET, the stock was up 25.84%.
The catalyst that sent the social media stock higher was word that Tesla (TSLA 0.70%) CEO Elon Musk had taken a surprisingly large stake.
NYSE: TWTR
Key Data Points
So what
A regulatory filing that dropped Monday morning revealed that Musk had acquired more than 73 million shares of Twitter stock, which amounted to a 9.2% stake, making him the company's largest shareholder. Based on Friday's closing price, Musk's stake was worth roughly $2.89 billion.
Image source: Getty Images.
The maverick entrepreneur has signaled his interest in Twitter, a platform he uses extensively. In a post from late last month, Musk polled his 80.2 million Twitter followers, saying:
Free speech is essential to a functioning democracy. Do you believe Twitter rigorously adheres to this principle? ... The consequences of this poll will be important. Please vote carefully.
Of the more than 2 million users who responded, 70.4% voted "No." Musk later asked if a new platform was needed and suggested he was seriously considering setting up his own.
The regulatory filing reveals that Musk began acquiring Twitter shares on March 14, 2022, well before his illuminating user poll.
Wedbush analyst Daniel Ives suggested this could be the start of "broader conversations with the Twitter board/management" and ultimately lead to a more active stake in plotting the company's future direction.
Now what
Twitter has struggled to keep pace with the financial and operating results of its larger competitors. While the company has been making some progress, challenges remain. In the fourth quarter, Twitter reported revenue of $1.57 billion, up 22% year over year, while its monetizable daily active users (mDAU) increased just 13%.
Management is also forecasting tepid growth in 2022, with revenue growth in the low- to mid-20% range, while suggesting that mDAU growth should accelerate over the course of the year.
Given Twitter's lackluster growth and ongoing challenges, Musk's stake in the company isn't sufficient-enough reason to invest in Twitter.
