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Twitter’s board should think ‘really hard about accepting’ Elon Musk’s offer: Analyst

CFRA Senior Industry Analyst Angelo Zino joins Yahoo Finance Live to discuss Tesla CEO Elon Musk’s offer to buy Twitter for $41.39 billion after backing out from joining the social media platforms board of directors.

Video Transcript

BRIAN SOZZI: All right, let's get back on that blockbuster news today of Elon Musk offering to buy 100% of Twitter for $43 billion. Angelo Zino is an analyst at CFRA and covers Twitter. Angelo, pretty busy morning for you, I imagine. So if you are in that boardroom over at Twitter, do you take this deal?

ANGELO ZINO: I think that's a tough one. I think if you're on the board over there, you're really kind of, you know, pushed into this corner right now. I think as far as maximizing shareholder value, and I feel it's your job, I find it, you know, very difficult to really reject this type of deal.

I think, you know, you're talking about north of a 50% premium from Elon Musk's original stake in the company. We're talking about north of a 38%, or about a 38% interest or premium from when, you know, his actual stake was announced. I just find it very difficult to think that this is a stock that's going to go much higher than, you know, $54.20 here in the foreseeable future, and if rejected, has the potential to considerably decline. So in my view, if I'm on the board here, I'd think really hard about approving this-- or accepting this deal.

- And, Angelo, any regulatory concerns here? You know, Twitter has largely avoided the limelight in a lot of these congressional hearings, not being too big to fail, at least in the social media aspect of it. Any possible objections from regulators here?

ANGELO ZINO: Well, now, listen, I think Elon Musk always kind of, you know, brings some regulatory, you know, noise alongside with him. And clearly, how he handled kind of just, you know, the initial state of his Twitter position, of course, is going to, you know, voice some concern over the next couple of months. But as far as kind of his actual, you know, interest to buy the company outright, I actually don't think there's much issue from a regulatory perspective, at least from my view.

I think this would be a much bigger issue if we were to see someone like an Alphabet go out and look to acquire a company like Twitter because they're kind of viewed as a company wielding so much power out there. So as far as Elon Musk himself, if he were to do this, I actually think this is a deal that would likely go through from a regulatory perspective.

DAN HOWLEY: Angelo, this is Dan Howley. I'm interested in your thoughts on Elon's kind of discussion about the whole free speech aspect of this, right? He's saying that he wants to have Twitter open up more.

But I've spoken to several experts who say that if you open up Twitter to free speech, fully unfettered free speech, you would essentially collapse the platform because you wouldn't be kind of taking out the negative voices, radical, you know, neo-Nazis who kind of get on to platforms like that. And that'll send advertisers fleeing because they don't want their ads sitting next to content like that. Users will flee, and that would essentially blow up all of Twitter.

So, you know, does that aspect of what Elon's saying here really kind of carry any water? Or is it just something to say as a means for him to buy the platform?

ANGELO ZINO: Yeah. Listen, I think it's extremely difficult to know what he's thinking as far as the whole free speech perspective is concerned and, you know, what he's actually really trying to do with this platform here. We've kind of seen him throw a number of tweets out there in recent weeks in terms of some of his intents out there.

I do believe, you know, I feel that he probably sees his own vision in terms of changing the algorithm around enhancing it. I do think there's potentially kind of an effort on his end, if he were to actually go through with acquiring this company outright, potentially kind of making the system more of a subscription-based offering.

But at the same time, listen, I think this is a guy who drives kind of so much interest in anything he does. If he were to actually go out there, acquire this company, he would just drive so much interest on this platform in itself. And I think, even if he were to kind of make this into more of a subscription-based offering, whether you're charging $1 or $2 a month for the platform, I think there are enough people out there where you can actually make a ton of money monetizing this thing.

BRIAN SOZZI: Angelo, we have a lot of, I think, excited traders out there on Twitter. It is the hottest trending ticker page on Yahoo Finance. But I do want to protect them a bit.

Let's say Elon Musk does not get his wish here, and he comes out and dumps his entire stake. Just given the problems he has brought up here in a very public forum regarding Twitter, should he do that? Is Twitter a sub-$30 stock?

ANGELO ZINO: You know, it's tough. You know, it's tough for me to actually give a price out there. I mean, clearly, I do think this kind of gravitates back to the low-mid $30 range. I mean, and then it all becomes on how this company executes out there, and, you know, clearly, historically, you know, the last kind of five to seven years, definitely underperformed peers from that perspective.

But our view is, you know, if you were able to kind of see the stock back in the low-mid $30 range, it becomes very appealing again, I think, for a lot of value-oriented type investors out there that thinks this company could potentially turn it around. So we would actually potentially be buyers again in that dollar range.

And just so investors out there know, we did downgrade the stock earlier this morning to a hold from a buy recommendation because our thesis has largely played out here, you know, our target price being $55, that offer price being near there. So at this point in time, we'd actually kind of take your money and run and wait for a more appealing risk-reward opportunity if that opportunity, you know, becomes available to you.

BRIAN SOZZI: All right. We appreciate you taking some time. I know it's a busy morning. CFRA analyst Angelo Zino, we'll talk to you soon.