Closing Bell - Closing Bell: Elon Musk buys Twitter, Stocks stage big comeback 4/25/22

Episode Date: April 25, 2022

Shares of Twitter rallied on news that Elon Musk will officially buy the company for $54.20 per share, or roughly $44 billion dollars. Analysts Youssef Squali, Rohit Kulkarni, and Ygal Arounian weigh in on the move and what it means for the future of the social media giant. Plus, former SEC chairman Harvey Pitt discusses the potential regulatory headwinds around the deal. And as tech leads the market comeback, Chris Caso from Raymond James explains why he just upgraded chipmakers AMD and Marvell.

Welcome to Closing Bell, everyone. We begin this hour with breaking news on Twitter. Elon Musk will officially acquire Twitter, taking it private for $54.20 per share in a deal valued at approximately $44 billion. The stock remains halted right behind me. We're keeping an eye at post eight here on the floor of the New York Stock Exchange. Many crowd gathering there waiting for the stock to open, expect it maybe to go up toward that offer price. It was at the top of the S&P 500 today, up more than 5.5% at 51.63 when it was halted. Let's bring in Dan Premack from Axios, Yusuf Squally from Truist, and Mike Santoli. Mike, keeping an eye on the stock here, as far as the deal price, what are we looking for in the market? It's amazing

how fast this got done and what a reversal and a change of heart it is for Twitter's board. Right. You have the board agreeing to a cash deal, 54-20. The stock should open up right up against it. The only variables at this point is, is the financing going to be done? It's committed at this point. I think there's general confidence it will get done. Is there a regulatory glitch in there? Unclear. It seems as if maybe the idea that potentially another bidder comes in is pretty minimal at this point, because you would think the board would have had those feelers out before.

And so at this point, you know, the way the stock is, there's not a lot of movement from this point up to the bid. And we'll see if there's any other variables we haven't yet heard about. Dan, what does this suggest to you? I like how Kramer put it earlier today. He was saying, look, they didn't want their stock to get down to 30. They saw what just happened to Netflix. They're set to report earnings this week. If it was another disappointing earnings, you know, that's what could have happened. So they went with the other option.

Yeah, I would think this suggests the earnings we're going to see on Thursday aren't going to be great. And one of the things that Twitter put in this press release was there will not be a conference call or an analyst call tied to those earnings as there normally would be. Just to pick up quickly on something Mike said, you know, we've seen reporting that there's no GoShop as part of this. We also, in the press release, there's nothing on breakup fees on either Twitter or Musk's side. We'll obviously hopefully get that via probably an FCC filing or something more detailed. But that's pretty interesting, right? Because Musk himself is still on the hook for almost all, you know, for half of this deal. There's no equity partners listed here. And what happens if Twitter does

find a better offer if somebody just unsolicited shows up? Take us behind the scenes, Dan, about how this happened in such a quick time period and why the big reversal for Twitter's board that they decided to do this. I mean, I'll say first what I don't know, which is the role of Jack Dorsey didn't play in this, right? Because he seems, even though he has a small, very small shareholding of the company, only one vote on the board, he is the person who has been there longest. He plays an outsized role. He obviously has a relationship with Musk.

I think the main thing was I feel that the board was going to call Musk's bluff on the financing. And once he put it in writing, not what he did with Tesla and Funding Secured, once he put it in writing, they maybe didn't have another choice at that point. He called their bluff. What does it say to you, Yusuf, about the board, the leadership, the fact that this was a unanimous deal and that they are accepting Elon Musk's offer? I mean, what it says to me is the board. Oh, Yusuf Scully, for you.

Yeah, thank you. So I think, look, this basically says that the board initially was not interested in selling and then, you know, kind of invested shareholders existing. Twitter shareholders put their feet to the fire. And that was the fact that the funding all of a sudden became secured, quote-unquote, kind of forced them to take the issue more seriously. And look, I mean, $54.20 a share is equivalent to about seven times revenues, about 26 times EBITDA. That's about twice as much as where Facebook is trading, so that's 30%, 40% higher than Alphabet.

I think that's a great deal for shareholders, even though the stock was at $77 a year some time back. At least from the shareholders that we've spoken to, they were very relieved to see this deal happen. So I think there are a lot of happy shareholders here, all things considered. Is it a good deal, Mike, for shareholders or are they selling themselves short? It's relative to what else was available in the likely place that the stock would trade to. So what's happened in the less than two weeks since he first offered to buy the company?

Facebook, Pinterest, Snap, all down 10 to 12 percent. In that just short period of time, you did see Netflix blow up. The people that own Twitter, the professional shareholders that own Twitter also own a lot of tech stocks that are just blown up. So I do think it probably was, all else being equal, something where shareholders would pressure the company and say, we think 54-20, bird in hand, is a whole lot better than we might expect down the road, even if ultimately you could have gotten the stock higher. Yes, it traded at 70 late last year. I thought, by the way, the board could easily still have said

no. It was all about the boards. You know, are they willing to say no, not have another good option and let the stock go where it might? I mean, that would have been the tough part. But it was not impossible. They were not obligated in any sense to take this. Not the route that they are going. Julia Boorstin also joins us, covers the company. Julia, what more can you tell us about what you know about Twitter's change of heart, first rejecting the unsolicited bid, adopting a poison pill and now unanimously accepting it? Yes. Well, first, I just need to note that there are now reports that the CEO of Twitter, Parag Agarwal, and the chair of Twitter, Brent Taylor, are going to be

hosting an all hands meeting for employees today at 5 p.m. Eastern, 2 p.m. Pacific to talk about the news, saying that they want to talk to their employees about what this means for them and also for Twitter's future. I'm sure there are going to be a lot of questions. As you can see now, that's Twitter's headquarters in San Francisco. Unclear how many employees are in the office today, although we can imagine that people are going to be dialing in to that meeting to hear more about what's going on. Now, as for the deal itself, Musk bringing Twitter private at $54.20 per share in this transaction valued at $44 billion.

In the press release, they point out that this represents a 38% premium to Twitter's closing price on April 1st. That was the last trading day before Musk disclosed his approximately 9% stake in the company. Musk saying in his statement in the press release, really laying out his purpose and also his mission with Twitter saying, quote, free speech is the bedrock of a functioning democracy and Twitter is the digital town square where matters vital to the future of humanity are debated.

He goes on to say, I also want to make Twitter better than ever by enhancing the product with new features, making the algorithms open source to increase trust, defeating the spam bots and authenticating all humans, saying Twitter has tremendous potential. I look forward to working with the company and the community of users to unlock it. Just interesting to note here that he's not talking specifically about financial opportunities to make changes. Financial potentially has been very critical of Twitter's ad-supported business model. Now, as for the about phase for Twitter's board,

Brett Taylor, of course, the chair there and that board accepting a relatively small premium over today's trading price, Brett Taylor saying in the press release also, quote, the Twitter board conducted a thoughtful and comprehensive process to assess Elon's proposal with a deliberate focus on value, certainty and financing. The proposed transaction will deliver a substantial cash premium. We believe it is the best path forward for Twitter's stockholders. I think it is worth returning to that fact that Twitter is reporting its earnings on Thursday. We saw in Snap's earnings some of the structural challenges facing these ad-supported social platforms. Snap has done a good job of navigating them, Sarah, but you just have to wonder how negative those numbers and the outlook

might be in those results coming out on Thursday morning and why the company might have been perhaps rushing to get this news out before those earnings Thursday. A lot of good context, Julia. Thank you, Julia Boorstin. Dan Premack still with us. And Dan, I do wonder, to Mike and Julia's point there, if it says something about the sentiment toward social media stocks. Before Twitter earnings, we do get meta earnings on Wednesday. Last quarter was a huge disappointment. And there are some real concerns about not just the stock market, but this very part of the stock market. Look, that's absolutely true. And I think the point that Mike or Julia made about how a lot of the bigger investors, bigger institutional investors in Twitter also are big institutional investors in lots of the other social media platforms. And they've been getting hit. This is a chance to get a premium, albeit, you know,

less money than the stock was worth six months ago. Yeah, look, you know, this is an industry that it's not quite falling nice, but it's an industry that has been going down. And this is a chance to get some, you know, some green on the table. That's certainly part of it. And the other thing, I think if your Twitter's bored, if you believe where the economy is going, where social media is going in terms of challenges ahead for companies already always been challenged, this is the path passive least resistance. You know, declare victory and walk away. Yusuf, what do you expect from some of the competitors and from the group and overall for the stock performance? And what do you think this deal signifies about that? Yeah, so I think Twitter is really a case by itself. I mean, the stock hasn't done anything since IPO nine years years ago i don't think you can pay the same thing about

you know faithful for map or or or not but i couldn't go we're actually you know uh... pretty positive going into the face book uh... print uh... in a couple days uh... we've done some channel check that basically indicate that uh... the number of ultimately may actually be better than what muted expectations will tell you. And I would say for Alphabet, it's even better because search remains just really the bedrock of digital advertising, not being hampered by, or at least not much being hampered by, iOS 14.5 headwinds, et cetera. So, you know, we think

expectations have been lowered pretty dramatically after the last earnings sprint. And I think we should see, you know, numbers that are at least in line, if not slightly better for both Google and for Facebook. Got it, Yusuf. We're just showing you a live shot there of Post 8, which is right behind me here on the floor of the New York Stock Exchange, because Twitter shares have reopened for trade. They were halted on that news. And no surprise, they are sharply higher. They were up 5.5 percent, Mike. Now they're up about 6.4 percent. We're still below the 54.20. They're going to stay below. It's a 3 to 4 percent discount. I mean, there's a time value of money. You don't know exactly when it's going to close. You're not going to pay exactly the amount that's coming to you from the deal right up front. And it does remain at least some outside chance that something happens where the financing gets delayed, regulators come in, or somebody has

a change of heart, perhaps. Well, we also want to show you shares of Tesla, which actually moved a little bit lower on this news as well, where Elon Musk is CEO and chairman of that company. Look, he's managed to lead a number of companies before, boring companies, SpaceX, Tesla. But no question, this is going to be a new challenge and a new distraction. We know the reason he wants to do this deal, which he's made clear on Twitter to his 82 million followers, is that he wants it to change. That's right. And there's no doubt that's one element of what's happening with Tesla shares. But the other one that's a little more tangible is he's going to almost certainly have to sell a bunch more of his Tesla stock. And he will have more of those shares pledged against the margin loan, which is part of the financing for the Twitter purchase.

So it's just also about a supply demand thing. A lot of his Tesla stake is now going to be somewhat encumbered by borrowing that he's done against it. Tesla shares down about 2 percent right now, $985 per share. Dan, so we know Elon's going to take Twitter public, private, excuse me. The question now is what is he going to do with it? And we have gotten some hints from him as far as his tweets and some of his ideas in that TED Talk. What do you envision happening here next? Who's going to run it and what's going to happen to this service that we all in the media use pretty often? I mean, the only thing he has

promised so far is that he wants to open source the algorithm or make the algorithm open source. Beyond that, huge questions, right? Who's the CEO? You know, Julia said that Farag is going to do an all-hands meeting. I would think the first question is, are you going to be here in three months? Because Elon in his initial offer basically said management has been mismanaging this company. It's hard to imagine that these folks get to stay. And then after that, the big giant question to me is, does Elon Musk really want to run Twitter as a business? Or does he want to run it kind of as a nonprofit utility? And I don't think that's out of the realm of possibility, almost like owning a sports team. You know, he doesn't want to lose a lot of money on it, but he might not care about really making

it much more profitable. He might view this as owning Twitter is the end to itself, not making it a very, very profitable business. Yusuf, what went wrong on that front, as this was a public company, as you mentioned, with years of underperformance on monetization, on profitability, and even on user growth? What can Elon do differently? Well, user growth is the key to everything, right? I mean, I think if you're able to bring to onboard people that engage a lot with the platform, then monetization happens, either in the form of advertising or in the form of subscription. And the board and the management team for the last 15-plus years has decided to go the advertising route.

That's what Meta and everybody else has decided to do. Now Musk is talking about potentially, you know, focusing on subscription, which is a completely different animal. Not sure exactly how he's going to go about that, particularly against the backdrop of an absolute free speech approach, right? Because advertisers may not be too crazy about having, you know, the absolute free speech environment. So it's going to be interesting. We don't really know. But my view is ultimately I think if he focuses on the product, the rest will take care of itself.

How ultimately he monetizes it is really almost irrelevant. Watching this tick for tick, a lot of action here around Twitter stock, which has reopened for trading. It's up now almost 6%. But the context here is it's up 33 percent, more than that, this month, since we first learned that Elon Musk had been building a big stake that started going back in January and did want to take this company private. Originally, remember, the company resisted it. The board adopted a poison pill to keep him from buying more stock. But clearly, he lined up the financing. He's been having conversations or at least reports that he's

been having conversations with shareholders. And now the board is unanimously accepting his offer to take Twitter private. Fifty four. Twenty. The stock just below that level. It's actually below fifty two dollars per share. Let's bring in CNBC's Leslie Picker for more on what we know about shareholders. Leslie, in this equation, clearly the board was feeling some pressure to get this deal done. The board was feeling pressure because Elon Musk was able to demonstrate that he did have committed financing in order to fund the deal. Before that, it was kind of just talk. After you have financing, then there is a series of protocols you have to take, according to Delaware law, in order to showcase that you've really studied the bid and that you're doing what's best

for shareholders. Now, the question of whether another bidder will come in, I would say the market is indicating it doesn't expect a higher bid at this price because it's not even trading at $54.20 a share. There's still a spread between where this deal is taking place. So that's something to watch as well. That spread should narrow as it gets closer, as the approvals take place, and as there's more certainty as to the deal closing. But I think the market is saying right now that it's excited about this deal.

It's kind of in a wait and see approach if it actually takes place. But you still got, say, three dollars, a little less than three dollars between the actual price of the deal. We'll keep an eye on that spread, as Mike Santoli was saying, he expects it also to come in closer as we get a price. We approach the deal right, Mike. We know that they want to close in 2022. It's a pretty standard discount right now. I wouldn't read too much into it, except, as Leslie said, if people really thought that somehow this is still in play and there's going to be bidders out there, you might build some of that in. But no, this is where it probably ought to be right now. And honestly, it's capped out at a cash bit. And so all of a sudden, this is very quickly going to become a boring stock if things go according to plan.

Twitter shareholders will receive $54.20 for each share that they own of that common stock. As Leslie said, it's in the hand of ARBs right now. That's about it. Let's bring in CNBC's Steve Kovac on a look at what this means for Donald Trump's rival social network, Truth Social. And of course, that question, Steve, about whether Donald Trump would be allowed back on Twitter and whether he'd want to even come back. Yeah, that's right, Sarah. And what Donald Trump just told Fox News is even if Elon Musk lets him back, he's not going to use Twitter. He's going to focus completely on this true social platform. Now, I will say DWAC, that's the SPAC that's supposed to acquire true social. It's done what? Nearly 17 percent right now. So it was down about 7 percent earlier. I see rumors that the offers

could be accepted by the Twitter board. And now it's just falling even further, despite the fact that Trump is saying himself, hey, this is going to be my platform of choice. I just logged onto True Social. He has used it exactly once in the last two months. So he hasn't been using it much at all, even though he's one of the he has total access to it. So it's pretty interesting to hear him say that, you know, this is the number one question for like people in the political world. Will Elon in this free speech move kind of allow Donald Trump back on after this permanent ban he received around January 6th last year, Sarah? And what does free speech even mean, Steve? I mean, that's another, right? Like, Elon has said he wants it to be the town square, and that sounds all well and good. But

if you look at where Twitter has had to crack down, hate speech, abuse, misogyny. How much time do you have, Sarah? Right. And we've all experienced this. And they're trying to do that, I think, to make it more appealing for advertisers and make it more appealing for users and the experience. So there is a question about what free speech without cracking down would actually look like. Exactly. How do you build a business on an anything goes type of platform? Free speech

has kind of lost all meaning. It means whatever you want it to mean. It means blocking the people you disagree with and letting in the people you agree with. It just has no relevance now on social media. So yes, can you build a business out of just this free speech, anything goes type thing? Well, advertisers, we know, are going to be turned off by that. So it's not going to be an ad business. And then there's the question, like we were talking earlier, does Elon Musk, you know, see this, is he going to operate it like a nonprofit as some kind of like free speech, you know, town square kind of thing where it makes no money? Because it's not, people aren't going to start paying to use it all of a sudden. I think as Julia Boorstin has keep saying, like over 90 percent of the revenue is tied to advertisers and advertisers don't want to put

their ads against that nasty content. So either the whole company shifts to the kind of from an ad based model to a subscription model or they just operate it like a nonprofit. Right. But is it this is a modern day media baron. Jeff Bezos owns Washington Post. Mark Benioff owns Time magazine. Like I don't know how they're operating. Are they operating it as profit profit? Certainly that's not the objective. And I do think there is probably some play in this, too. In other words, as a public company, the way it's been structured, it's been minimally profitable and not terribly profitable. But maybe you could look at that and say, does Twitter have to have 7,500 employees? Do we have to be, you know,

incurring as much cost as we are right now in terms of content moderation if he doesn't think that's a priority? So I'm just saying, if you're a lender to Musk and to the company on this bid, as there are several, they're going to be lenders to the company itself

as well in support of this bid. The banks, they're going to maybe sell some debt to the public. You probably want to know that there's some play in the financials, that you can cut things on the cost side. You don't have to bet on somehow remaking the business model overnight to be very profitable so that you can service what is a significant amount of debt based on the amount of cash that this company has been producing. Just want to show you what's happening in the market. You're seeing Twitter shares. They're up 6.2% or so, just below $52 a barrel. A barrel.

$52 a share. Again, below that $54.20, which Elon is taking the company private at. Communication services are the best performing sector in the market right now, and they are led higher by Twitter. If you look at the triple Qs, the Nasdaq rebounded earlier in the session, but Tesla is a weight right now. I just want to show you what's happening with Tesla stock. It ticked lower on this news.

It's down about 1.5%, and it is the biggest weight on the triple Q's. So we're going to keep an eye on that. There will be questions about what this means for Tesla, the stock, which he has to sell a little bit to finance this deal, and his focus as he now is taking on one of the biggest acquisitions in technology history. Yeah, absolutely. And we don't, again, don't know if he will day to day want to run it. Clearly, he's been able to surf among three or four different enterprises of his own before Twip that he's got going. Dan, Dan Premack, are you still with us? Do we know anything about what,

about what, how he, who would run this? What sort of ideas have been out there as far as what he would do with staff and what he would do with the model? No, we have absolutely no idea. And I think it is notable. And probably, you know, you started this entire segment by saying how quick this all came together. You know, normally we'd probably have answers to that in the announcement press release, but we don't. We have absolutely no idea right now, except, again, to say, given how critical he was of current management, it is almost impossible to believe they would stay there.

I mean, there's already speculation. Could Jack Dorsey take it over again and continue to run it and Square as he did before? We don't have much information. One thing that's interesting, though, that's how he fight if it did border subscription model than an advertising model i've heard that to that the only thing weird about it is if the idea that but the global public square empathizing description aspect automatically limit the number of people

who are on that in their access that global just because i have to pay to get in. The idea that this is open to everybody, now suddenly there's a toll. A lot of people have said, though, that this service should be for pay for a long time. I mean, it is pretty amazing that it is free sometimes when you see the content. They have. The business model, yes, but not based on what Elon has said, which is that this is a place where everybody should be able to go to express their opinions and to hear other people's opinions. If that's the case,

putting some sort of paywall up would seem counterproductive. Yusuf, have you done any work on that subscription paywall, the different options that Elon has on the table when it comes to managing this, if he does want to do it as a real business? Yeah, I mean, arguably, it doesn't have to be all free or all paid, right? You could definitely have a hybrid model where you can have kind of a premium, kind of a la Twitter Blue, which so far has not really been super successful, but maybe with a much improved product, it could be. And then you can still have the base product be free for everybody around the world to to to grain to gain

that scale I don't know I mean at the end of the day I think again it goes back to ultimately what will the product look like and you know whether he makes money through subscription or through advertising I think that that's secondary in the big scheme of things, right? It's really around this approach to free speech. And is that ultimately how he's going to go about this? Well, he said he wants to make the algorithm open source to increase trust. What does that mean exactly? Well, it basically means, I mean, to a certain degree, that just means that everybody in the world knows what are the drivers of the algo,

what are the inputs that go into the algo to show which tweet shows up first, which tweet shows up last, et cetera, and what gets trending and what's not, instead of having it be done behind closed doors. That's effectively what, you know, open source Aldo means. Julia Borson, are you still there? Are you still with us? Yes, I'm here, Sarah. So, Julia, question for you. What do we know about this employee meeting? You said that there are reports that Parag Agarwal is going to be talking to his employees a little bit later today.

What is he likely to say? Look, that's it for an hour and a half from now. I would assume there is a lot of concern among employees. There have been various reports about how employees want to know what their future holds. And just to go back to this fundamental question about Twitter's business model, I mean, there are there are giant groups of employees at Twitter who are focused on the advertising business and this question of building out effective advertising to target consumers with. And yes, there are these new groups that are building out subscription businesses. But if Musk is indeed not so interested in the advertising business, that would raise a lot of questions and perhaps concerns for a lot of those engineers and ad salespeople who are focused on the ad part of that business. is going to try to reassure employees, but not entirely sure what he's going to say, because,

you know, as you guys have been discussing, it's unclear who's going to be taking the helm of the ship now. Twitter shares do cross over that $52 per share mark again below the 5420, but inching higher. They've been building on their gains ever since they reopened just about, I don't know, 20 minutes or so after being halted for this news pending. Mike, and you do wonder if there are implications for other social media stocks here as they're about to report earnings. They've been crushed under pressure given all the growth concerns in the market, the sentiment around some of these businesses. Does this make things better for them?

It's unclear if it makes it better for them. For one thing, Twitter, probably not big enough in terms of advertising market share to say that there's going to be some kind of net gain for for others, even if they deemphasize that area. The other thing is, if you say, OK, this puts some kind of a floor in valuation for social media stocks, I would say that doesn't really quite persuade because he's buying it for very specific reasons, having very much to do with Twitter's role and what the platform means for the world and for him. It's not about I just want to own, you know, some pool of of social media revenues and users. Right. So I think it's it's

a tough linkage to try to make at this point in terms of what it might mean for those. Now, they have been crushed. Those will trade based on their fundamentals. Meta is unbuyable. And so it's just going to be about, you know, and it's not going to merge with anything at this point. So it's just going to be about are they turning the fundamentals around? You said just fifty fifty two dollars per share here for Twitter stock. If you are a shareholder of Twitter and you are buying Twitter on this news, what are the risks as we find out more about the regulatory process and what comes next after Elon's accepted bid to buy it? Well, I think buying it at $52 to make $2, considering all the potential things that could go wrong, we would not recommend, right? Because I think the money, most of the money has already been made, and now it's just kind of an arbitrageur's game. But going back to the other question about, you know, what it means for the other platform, I would argue with Michael that this is actually the situation where there is now a floor.

Yes, maybe, you know, maybe Musk sees it more than just a financial transaction, but he's paying seven times EBITDA. He's paying 26 times EBITDA, right? Again, Facebook is trading at about half. So even if you adjust for that, it's still a valuation that I think should help put some sort of framework around the other social platforms, which again, by the way, we think they're going to be okay. They're going to be releasing numbers that are not going to be, they're not going to resemble anything like what they did last quarter. Last quarter was kind of a one-off, we think.

So we think numbers- So you're a buyer of what, Meta? Which one specifically, in turning? Yeah, so we rank order them as Alphabet number one, Meta number two, and Amazon number three, although Amazon is not social. Although I wonder how many unique situations like this there would be in terms of just putting a value. Your point about the valuation floor, it's Elon Musk, it's Twitter. There's so much that's unique here, don't you think? Well, I mean, to a certain degree, yes. but he's still spending $46 billion, not to just, you know, because he's got that money, you know, laying around. I do think this is a valuable business that eventually he can, if he turns it around, there's no reason why this is not $100 billion for him over time.

So, you know, but we do think that there is still real value in the social platform. Twitter is basically the weakest link and got taken out at double the value of Meta. Yusuf Scully, thank you very much. Twitter shares up 6.5% after the board has accepted the nearly $44 billion offer from Elon Musk to buy this company and take it private. Let's bring in CNBC's David Faber on the news line. M&A reporter, David, what more can you tell us? What other color do you have? You know, Sarah, this is so extraordinary.

I'm just trying to get some senses to the board action here and what really went on in the many calls that they apparently had over the weekend in terms of trying to determine whether they would accept this offer. Obviously, as we sort of expected, there were no strategic buyers here, nor were there ever expected to be anybody that would be willing to come up and meet that price. And no private equity players, as we pointed out, would ever dare compete, nor could they even pull off a deal of this size or anywhere near this size at this price. that the board ultimately was unanimous in its belief that this was the right value, based on at least the projections that they heard from management and their financial advisors in terms of where those projections would ultimately be valued in the market.

And so here we are. But, you know, when this process began not very long ago, there were two key questions for this board. One, of course, was is it financing for real? Where would it come from? And will he give specifics, which he did last Thursday? And then the other one was value. And they obviously at least came to a conclusion of their own unanimously that that the value was there uh... at the private news that would be in

given that it was the best and final bid that many have anticipated including me would be projected perhaps that followed by some sort of negotiation that might end up but the higher price uh... not the case uh... and here we are the still could close very quickly to as we know brett taylor that the twitter chair dav, in his statement says the board conducted a thoughtful and comprehensive process to assess Elon's proposal with a deliberate focus on value

certainty and financing, and that it will deliver a substantial cash premium, and we believe it is the best path forward. Do you have to wonder just how much of the market environment played a role, the sentiment around social media stocks, the fact that Twitter's about to report earnings and what just happened with a Netflix and some of these other companies that are considered peers or competitors, at least in advertising, and just what the road ahead looks like. I do wonder if it's a statement about where we are in this market. Yeah. I mean, listen, when you're sitting and having a presentation from your financial advisor and discussing amongst the board, obviously your key responsibility is to try to get full value for your shareholders and to change control.

But you are taking all those things into account, without a doubt, Sarah. You're taking into account where the market multiple or the multiple on these kinds of companies and their stocks is right now, where you expect it to be. And to your point, and I think an important point, you know, what are those numbers going to look like from Twitter when we get them? And the one thing we don't know is what are the projections from management? You know, where were they? Were they where the street was? Were they perhaps below what might be anticipated by the investor base? And so that's got to be a part of it as well. But certainly you do take into the current conditions and the current multiples in terms of where, you know, there's

no necessary peer group, so to speak, because this is sort of a unique platform. But you can obviously back into some numbers. So, David, $44 billion deal would make it a very large, one of the largest leveraged buyouts that we've seen, one of the largest technology deals. What comes next as far as the process unfolding? Yeah, I mean, it's extraordinary in every way, right? The world's wealthiest man doing a deal. I mean, how often have you seen a press release in all my years where it's one guy? You know, it's one thing for Jeff Bezos to buy The Washington Post for $250 million. It's another for Musk to buy this unique platform for $44 billion. What's next, really, I mean, you know, this is a point I made last week.

It seemed to be a minor point at the time, but it did go into how quickly they were able to get a deal, which didn't even require any business due diligence on his part. There's no financing, you know, that he's guaranteed the money, the $21.5 billion. He's obviously already got the other debt financing and the margin loan that he delineated as well. Sarah, unless there's unexpected opposition on the regulatory front, this could close quite quickly, and Twitter will become a private company. Now, I say that because you just don't know when it comes to regulatory. There are no obvious impediments, certainly not from a traditional antitrust perspective.

But, you know, is there going to be some sort of argument made in terms of the power of this platform and the fact that the wealthiest man in the world is going to control it and that he also controls Tesla and SpaceX? I have no idea. It would seem to be a very hard argument to make, but it's not one that you can completely dismiss. So barring that, this deal could close very quickly. Also a completely new kind of model for, I would think, activist investors and proponents of activism.

Certainly not something we're used to seeing. David Faber, thank you very much for jumping on the news line. Really valuable to hear from you. Let's hit that regulatory question that David just brought up, because joining us now on the news line is former SEC chairman Harvey Pitt. Harvey, great to talk to you. So what sort of issues might arise here on the regulatory front for Elon Musk behind Twitter? Well, I think there are issues that relate back to the fact that when Musk acquired his position, he filed the wrong form, and then he filed the correct form late. So there were investors who may have been misled by the fact that initially he filed forms for a passive investment when, in fact, he intended all along to be quite aggressive. That means that there may have been violations

of the securities laws that he will have to contend with, and he'll also have to contend with his favorite regulatory agency, the SEC. Right, where he's run into issues before and really has doubled and tripled down on talking, I would say, not nicely about them. So, Harvey, are these the sort of things that could actually block the deal from getting done or just present some delays? Yes, I don't think that they would block the deal from getting done. But they could prevent, present regulatory delays. For one thing, he is probably subject to an investigation. And if that's the case, that could go on for quite a long time, and there may be issues that arise as a result

of that investigation that we haven't heard about yet. What do you think about the SEC's relationship with Elon Musk at this point? They find him. He's gone after them since then. He sort of thumbed his nose at them all along the way, including this wrong disclosure. There's no requirement in law that you have to like my beloved former agency. He's entitled to dislike them. What he really shouldn't be doing is acting like a juvenile and just baiting them and taunting them and attacking them. That just means that he's creating a harder road for himself.

And one has to wonder about the maturity of somebody who would do that. But I believe that he's going to have problems with the SEC, and he will continue to have problems with the SEC. Taking this company private will not subject them to public company regulation but the process may have been included violations of law that he will have to address and uh... uh... redress that the SEC so chooses right violating that that

rule of disclosure that you need to basically telegraph to the market your intentions and taking that stake. What about the fact, Harvey, that he is now going to be the CEO of Tesla, running SpaceX, the boring company? He regularly uses Twitter to promote and hype some of these companies. Is that an issue for regulators to take up here? I wouldn't think so i i think that uh... of stretch uh...

he uh... uh... is really seen as an idea of them and not at the hands-on uh... corporate uh... technician he has other people to do the technical things, and Musk has been a big picture type of person. So I would think that there's, you know, some people may question whether he is spreading himself too thin, but my guess is that that won't present a single regulatory hurdle for him

to get over. No, it's that disclosure. And just to be clear, I guess the thing they would have to investigate, Harvey, you explain it to me, is whether he intended to mislead with that disclosure. Is that the question here? Well, I think so, because filing the right form is not very difficult. This isn't rocket science. And he's got tons of great lawyers working for him. So the fact that he filed what is technically a 13, which is a passive statement, when he should have been filing a 13D,

is something that looks as if he should have known. Now, whether it was deliberate or not, whether the SEC can show that, I don't know. But whether or not it was deliberate, it's still a violation to file the wrong form. Right. Hard to tell whether it was an inadvertent mistake or an oversight or whether he had the intent to sort of violate that rule. Harvey Pitt, thank you very much for jumping on the news line. We'll see what happens there. Let's bring in CNBC's Robert Frank. Robert, extraordinary to see the world's richest person spend $44 billion to take Twitter private.

What have you been focused on besides just how Elon is going to get this done, which we know he's going to have to sell some Tesla stock, which is weighing on Tesla? What else do we know about his intentions and where he goes from here? Yeah, look, I was surprised that he's funding as much of this deal as he is. Now, remember, two thirds of this total price is coming out of his own pocket. He's got about a twelve point five billion dollar margin loan, but he's got to put up sixty five billion in stock and Tesla stock for that. So that's a big chunk of change out of Tesla. And then he's got to fund $21 billion

in equity. That's got to be cash either from selling Tesla shares or perhaps some kind of stake in SpaceX or Boring, wherever else he can raise that money. And so, you know, he's worth $260 billion. You can say, well, what, $40 billion is not a huge percentage of his net worth. But it's not liquid. It's a big burden on the Tesla shares. We see those shares down about a percent and a half today. But if you look at what he has already pledged going into this deal, which is 88 million of his Tesla shares, add on top of that, however many shares he's going to have to pledge for this, could be 60 million, could be less. You know, more than half of his total Tesla stake will be pledged. And a

lot of that rolled into this deal. So, you know, there was a comment on Squawpots this morning, you're trading caviar for pizza in this because you're trading Tesla shares for Twitter shares. And is that really going to be as good a long-term value? Look, it's his own investment. He can do what he will. But he's putting a lot of his own chips and a lot of Tesla chips on the table here. And we're going to see that reflected in Tesla shares, not to mention all of his attention being distracted by Twitter and whatever kind of regulatory backlash we might see against the owner of Tesla, Boring, SpaceX, etc. Right. So Tesla is under a little pressure, though not much. It's down less than

two percent there on the news. Twitter shares continue to go higher. Robert, it's a stunning move. It's also sort of a new it's a new model, I was saying, for an activist investor, for one of the world's wealthiest. And also, you know, when you think about these billionaires buying media companies, he says he wants to do it for the sake of democracy and the public square. And you just wonder where that is going to take us. Yeah, I mean, David pointed out, well, we go back to Jeff Bezos buying The Washington Post for $250 million, and that was considered a big deal. The Post is very important, but it is not Twitter. It is not the global public square that Twitter is. And having someone of Elon's wealth and influence already, both through his companies and his personality,

add on top of that now controlling truly the global town square. This is just uncharted territory for wealth, for political power, for influence, for speech, for all these things. Right. Big, big questions for all of us. Thank you, Robert Frank. We are going to go straight into the closing bell market zone because we've got about 16 minutes left of trade. And as this Twitter news has been unfolding, the broader market has rallied. Stocks staging a pretty amazing comeback after starting the day under pressure. We're now at session highs and actually climbing into the close. Earlier in the day, the Dow was down more than 300 points. We're now at session highs and actually climbing into the close. Earlier in the day, the Dow was down more than 300 points. We're currently up about 264 points.

Communication Services is leading the S&P 500. That's a move on Twitter, which is up 6 percent, although you've also got some nice moves in some of the media names like Warner Brothers Discovery ahead of earnings, Live Nation, Dish, Alphabet is rising into earnings. We saw technology turn early with the Nasdaq going positive. Guess what? Now the Nasdaq 100 is up 1.16 percent. Mike Santoli didn't even wait till turnaround Tuesday. Wasn't that when it was supposed to happen after a brutal few days of trading last week? The final two days of last week, S&P dropped 5 percent.

Yeah, well, we did get a little further follow through to the downside in the morning. A lot of times that somewhat fits in with the playbook. People look for Monday weakness after a Friday down. The way I would broaden it out and say, look, the S&P 500 at the lows today, just before noon, had been trying to maybe put in some support, kind of make a stand right near where it had before. 4,200. They tried a few times, didn't break through it. We do have a Fed speak blackout this week. So whatever is baked into the Fed, we've heard it already. We'll wait for the actual details next week. And then you do have the big FANG type stocks reporting earnings this week right ahead of us as the Nasdaq 100 was down 20 percent or so going into it. So all that

stuff together, people were pretty negative. A lot of today looks like an unwind of the popular trades before. The ARK funds were up all day. That seems like short covering. That seems just like essentially, you know, taking profits on the shorts, maybe going back to some of those laggard areas. But some of the things we saw, like energy down, materials down, coming into today, showed you that it became a little more of an indiscriminate sell-off. Sometimes that's what happens in the latter phase of a correction. Well, the difference today is it wasn't just about the Fed. We started the day on worrying about China. China was the concern, right? We saw some of those major averages in China off 5%, 6%.

Worst day since February 2020. We saw it spill over to the other stocks in Japan, down 2%. And then in Europe as well, concerns about increasing lockdowns there. Shanghai has been closed almost a month, and now they're mass testing in Beijing. And we're worried about that expanding. So how do you process a weaker China and potentially more problems for the supply chain on top of everything else? I mean, just another thing. I think people have basically been putting the stock market in the so-called too hard pile.

There's just too many things and it's hard to see daylight in any direction. However, again, I said the market bottomed right before noon. That's when Europe closes, right, 11.30. And it just seems as if it was, let's trade on our own basis right here. Maybe we'll worry about China overnight tonight again. K-Web, the Chinese Internet ETF that a lot of people follow, also well off the lows of the day, down about two-tenths of one percent. But that was pretty much the center of the action earlier this morning. Let's get back to Julia Boorstin, talk more about Twitter. Of course, that news

just breaking just before the top of the hour that Elon Musk's offer to buy Twitter for $54.20 a share has been accepted by Twitter's board. Julia, how could it affect Facebook and some of these other names which are getting set to report? Because we are seeing a little bit of a rebound today. Meta's higher, Alphabet's higher, Amazon and even Apple has turned around. Well, look, I think there is this question about whether or not the board's willingness to sell right now, just a couple of days ahead of earnings, indicates that Twitter, the company, is facing massive challenges when it comes to its advertising business. This is something that was raised by Evan Spiegel in Snap's earnings, which were better than expected. But I think now the question also becomes,

how much does Elon Musk owning Twitter potentially benefit the likes of Meta and Alphabet in terms of regulatory issues? There was some speculation by analysts that there could be perhaps less interest in reforming Section 230 and holding social platforms accountable for the content that is shared on their platforms if Musk owns Twitter, because that means that some of the concern of the Republicans that they were being unfairly limited or censored on Twitter might be resolved by that. So is potential that there would be less of a bipartisan push to reform Section 230. And then also just in terms of the fact that Meta has been such a lightning rod for criticism, Sarah,

drawn so much concern, maybe some of that's going to come Twitter's way right now. We just got a statement from the NAACP president, Derek Johnson, talking about the fact that hate speech is unacceptable and that hate speech has no place on Twitter. He effectively urges Musk to not allow different platforms to become, different accounts to return to Twitter, specifically referring to the president and saying do not allow Twitter to become a petri dish for hate speech. What you're showing right now is Elon Musk's comment that was part of that press release saying that he is very much focused on free speech. That really is the reason why he is pursuing this deal, because he wants to make sure that platform can be that Twitter can be a platform really for free speech and says he does also see ways to enhance the product. But I think

that people are going to be concerned about whether or not Musk is going to allow President Trump back on the platform. Of course, with emojis and all, with rocket ships and hearts. He's got 83 million followers. He's one of the most active users, most widely followed, and soon to be owner of this company. Julia, thank you. Julia Borson. Let's bring in Rohit Kalkarni, analyst from MKM Partners, and Igal Arunian from Wedbush on the news line. Thanks to both of you for joining us. Rohit, are investors getting a good deal here? I think so. Again, I think Twitter is in the middle of a transition that's going to take a long time. I feel near term, I think macro and micro headwinds on Twitter are just going to amplify the weakness here.

So I think it's a very good deal for investors. It remains to be seen what happens longer term with Twitter. What can Musk do and what is he willing to do is a big question. But near term, I think it's a very good deal for investors. Egal, do you agree? Yeah, I agree with that sentiment. The multiples at price point here are a strong premium to the group, pretty close to where Snap is trading, a slight discount on revenue and EBITDA multiples, but the growth there has been much slower.

A big premium to Pinterest, where growth at Pinterest has been stronger than Twitter has. And just a lot of question marks around user growth and Twitter I don't think have gone away. And I agree that the sales here indicates that the results in the quarter and maybe the outlook aren't going to be that strong. And that seems to be everybody's takeaway. Rohit, what does it mean for competitors, a Meta, a Snap, a Pinterest that also rely on ads? How are they looking at this deal? Overall, I think it's a positive. If you look at, you know, there is somebody who's extremely influential in the tech industry.

He's looking to take a very long-term view on an asset that has underperformed, has under-executed, under-invested in technology, and they're willing to take that long-term view in their position in the overall kind of global ecosystem as such. If investors decide to do that, I think there is a lot of value in other social media assets. Also, kind of tactically near-term speaking, I think the volatility at Twitter probably creates a market share shift towards smaller companies

like Pinterest and maybe Snapchat in the near term. I feel that creates a tail share shift towards smaller companies like Pinterest and maybe Snapchat in the near term. I feel that creates a tailwind for those two companies. So net-net, I can't think but positive things from what Musk is thinking over the longer term for not just Twitter, but social media and just the overall misinformation, disinformation, bot traffic, all the things that he's talking about. Meta only up about 1.3 percent. Egal, it's down 44.5 percent for the year, and it's about 51 percent off its highs. Does this really change anything for Meta Facebook, which is going to report on Wednesday? No, I don't think so. Twitter is

just a fraction of the global digital ad market. Meta and Google are materially larger. They represent nearly about 60% of global digital advertising. Twitter is closer to 1-2%. So, you know, Twitter is not

enough to move the needle for Meta at all. But I agree with Rohit that for the small advertisers, Pinterest, Snapchat, TikTok, and even some other smaller platforms like Nextdoor, there should be some budget that might shift around and this might be a benefit to them. But for Facebook and Meta, probably not going to change anything. What about for the Pinterest and Snaps, which your colleague here, Rohit, thinks that there's some value in? And this confirms it, the smaller names. Yeah, absolutely. I agree with that.

I mean, their share of total digital ad dollars are pretty similar to Twitter's. So, you know, dollars moving off of Twitter onto Pinterest, you know, might move the needle for them. I think there's some real value for advertisers in those platforms. And now there's just one, you know, there's still going to be advertising on Twitter, but Elon did talk about changing the model, being more subscription-based, less focused on advertising. So there should be a lot of changes. And for the smaller players in the ad world... I wonder, Rohit, what is going to happen when Twitter reports earnings on Thursday?

What is this going to be like? And what is that call going to be like if they even do it? I'm a little bit cautious on Twitter's prospects for 1Q, 2Q. What Snap told us last week on weakness in brand advertising, almost 80-85% of Twitter's revenues come from brand advertisers. So just that one straight line interpretation is that Twitter could have hiccups in 1Q, particularly what Snap witnessed during March, and how that has kind of trailed into April as well.

So, net-net, there are more kind of incremental warnings to be had on Twitter as we approach Thursday. That's my take. So, probably it was better off to be sold today rather than wait for Thursday night. Twitter shares still remaining below $52 per share, $51.77, up almost 6%. Do you read anything finally, Egal, into that price that we're below the offer at $54.20, which was just accepted? Just some hedging around it. There might be people that obviously aren't expecting the deal to close, but I don't think so.

There shouldn't really be big regulatory here. I'm sure it'll get looked at in Congress, but there's no antitrust issues or anything like that. I would expect it to work its way up to that agreed-upon price over the next couple months. Just that pesky little disclosure issue that he filed a 13G, as Harvey Pitt highlighted. They're going to have to look into that. Thank you for joining us, Rohit and Igal, with Twitter shares up almost 6%. The Nasdaq is up more than 1% now. Nasdaq 100 up 1.25%.

It's leading this late-day rally. It turned early, and then everybody else followed. The Dow is now up 242 points. AMD and Marvel both jumping after upgrades from Raymond James. That's certainly helping the Nasdaq. Joining us is the analyst behind that call, Chris Caso. Chris, the concerns around some of these semiconductors is just cyclical, right? So why did you upgrade the stocks? Do you think it's just been overdone? Well, for these two particular names, we think there's less cyclical exposure to two of them.

I will also add NVIDIA to the list, which is another one that we've liked, but we've had a strong buy on that for a little bit here. And really what we're attempting to do with these moves is to show who's got some product cycle, some content gain stories within it that aren't as exposed to what's happening with the macro. And AMD and Marvell fit that bill. Of the two of them, which do you like better? Which one do you think has the biggest valuation opportunity? Well, AMD, we have a strong buy on that right now. AMD, really, the story there is share gain versus Intel, and we've been positive on that stock for about a year. We're using this opportunity to kind of double down in that call. In that case, we think it's just all about share gain versus Intel. And now that we know the roadmap of Intel versus AMD over the next three years,

we just think that share gain is inevitable. In the case of Marvell, it's more about their exposure to the cloud, which has been one of the best areas of tech still. But again, and even in that case, it's about specific drivers, things like the optical transition in cloud networking in the 5G rollout in the U.S. And these are things we think are going to happen regardless of what's going to happen with the economy over the next 12, 24 months. Chris Cazo, thank you for joining us. Sorry to keep it short. Definitely wanted to get you on, though. Market moving calls on AMD. Thank you. And Marvell. We've got a little over two minutes to go. My communication services leads. Technology is doing well. A lot of times that does happen when you have an early sell-off. You have more stocks down than up, and it's hard to turn those statistics. But take a look here.

So you have slightly more volume in declining stocks than advancing stocks on the New York Stock Exchange. Now, the NASDAQ is significantly stronger along that front. So keep that in mind. That is really where the buying has been. It's also where the damage has been the greatest over the last several months. Take a look at stocks versus bonds on a month-to-date basis. Now, they've been going down together, but just over the last couple of days before today, you saw stocks kind of crack through where the aggregate bond index did. So maybe there'll be some modest reallocation into equities as we get into month end. Probably not that big a deal because it's not a quarterly,

but worth keeping in mind that stocks did start to underperform just a bit. Volatility index actually poked above 30 today, and it's now down around 27. Some people look at a three-point decline from a peak at a close. It could be almost the beginning of a buy signal and a sign that maybe the fever is breaking when it comes to the anxiety built into the options market, Sarah. As we go into close, just want to do another quick check on Twitter's stock of the hour. Of course, on word that Twitter has accepted Elon Musk's offer to take it private, 54.20 a share. The stock is trading up almost 6 percent, 51.74, just a little bit higher where it was before it closed on this news. But clearly the news was taking us in this event, and the stock is already up 33% or so just this month on word of it. Tesla shares, on the other hand, questions about whether how

much he'll have to sell of Tesla stock and where his focus will lie. Tesla's down about six-tenths of a percent, so really it hasn't been too dramatic. It was down 2%. As we head into the close, a pretty stunning comeback for the overall market. The Dow Jones Industrial Average up 217 points. The S&P up 22, or half a percent, which is a far cry from where we were earlier this morning. That's going to do it for me. I'm closing now. See you tomorrow.