Twitter Takeover Makes Waves & Indices Rally

Yesterday, the tech industry captured headlines as Wall Street-listed stocks rallied and Elon Musk’s Twitter takeover bid moved forward. Let’s take a look at Monday’s tech trends:

Wall Street Rally

Major American Indices have struggled to stay afloat this year in the face of the continuing coronavirus pandemic, skyrocketing inflation, and the economic ripples emanating out from the conflict zone in Ukraine. However, tech shares may have been having an even rougher go of it so far this year, with some major names in the industry dropping even more quickly than the S&P 500 (USA 500) average.

Some of the biggest names in tech, like Amazon (AMZN), Apple (AAPL), and Meta (FB), are set to reveal their first earnings reports of 2022 this week, but many analysts are still skeptical regarding their ability to successfully grapple with strong economic headwinds. In times of market volatility, like that which has defined 2022 so far in large part, traders generally tend to shy away from ‘risky’ tech stocks and move assets into safe havens like Gold (XAU) or Silver (XAG). According to many market watchers, the prospects for some names in Big Tech are not shining. 

However, Monday showed a slight turnaround for many technology shares, which pulled major Wall Street Indices upward along with them. By the ringing of the closing bell yesterday, the Nasdaq (US-TECH 100) was up by just under 1.3%, the Dow Jones Industrial Index (USA 30) had risen by 0.7%, and the S&P 500 gained over 0.5%.

Two of the best performers in New York yesterday were names that may well be familiar to savvy traders. Moderna (MRNA), a pioneer in the biotechnology field, jumped by 7%, and Microsoft (MSFT), gearing up for an earnings release today, rose by almost 2.5%. The buzz surrounding a social media giant, however, overshadowed much of these other firms’ success on the trading floor yesterday.

Musk’s Twitter Takeover

After weeks of anticipation, Tesla (TSLA) CEO Elon Musk’s quest to take control of microblogging platform Twitter moved forward on Monday. Reports of the richest man on Earth’s bid to buy Twitter first spread in mid-April. Rumours regarding the supposedly hostile relations between Musk and Twitter’s executive board abounded in subsequent days, but yesterday, a deal between the two sides was reached.

Despite widespread speculations that Musk did not have enough liquid cash on hand to finance a potential Twitter takeover at $54.20 a share, the electric vehicle mogul has apparently secured the $44 billion in funding necessary to move forward.

While Musk is already the firm’s largest shareholder, with a 9.2% stake in the company, he apparently plans to take Twitter (TWTR) private once his control is consolidated. This would represent the largest privatisation of a publicly-traded company in twenty years.

In a statement released along with the deal’s announcement, Musk reaffirmed his commitment to preserving free speech on the platform, the potential restriction of which has been a consistent cause for concern among his critics. With Twitter having come under increasing fire for being a source of misinformation in the COVID-19 era, along with its by-now-venerable reputation as a political organising tool, how Musk will change the way information is shared on the platform is as yet unclear.

However, traders yesterday responded to the news of the upcoming takeover deal with what seemed like optimism. Over the course of the day, Twitter shares jumped by almost 5.7%, outpacing the Indices in New York as a whole. The social media giant has only turned a profit in eight of the past ten years, so only time will tell whether this momentum can be kept up, justifying Elon Musk’s massive investment. 

2022 so far has been a year of economic volatility and surprising news, with one trading day’s winners precipitously dropping the next. The path forward for the U.S. tech industry is still opaque, and a plethora of factors will determine whether Big Tech’s losing streak can be broken.