By: Abrar khan
Tesla CEO Elon Musk has taken a major interest in Twitter less than two weeks after criticizing the social media platform on free-speech grounds — and Twitter stock is soaring.
Twitter (ticker: TWTR) stock was up nearly 25% Monday after Musk purchased 9.2% of the social-media company’s stock, according to a filing with the Securities and Exchange Commission. Tesla stock was up 3.4%. The S&P 500 rose 0.3% , while the Dow Jones Industrial Average was down 0.1%.
“Twitter has long been criticized for not realizing its full potential, and TWTR shareholders are hoping Musk can move the company in that direction,” wrote the folks at Bespoke Investment Group.
The performance of the two stocks couldn’t be more different over the past year. Tesla (TSLA) has gained 57% as it has become increasingly obvious that electric vehicles are the future of transportation
and that Tesla has a huge lead over other car makers. Twitter, on the other hand, has dropped 39% as high-priced tech stocks were punished, largely for reasons outside their control.
One of the biggest was the Federal Reserve’s shift to tighter monetary policy, something that hits the valuations of high-priced growth companies. Twitter’s 12-month forward price/earnings ratio has fallen to 43.9 from 66.9 five months ago.
Now Musk has given Twitter stock a big lift. His stake in Twitter is said to be a passive one, but as the stock’s reaction shows little Musk does is passive
and just his presence is giving Twitter a big boost. Musk recently used Twitter to argue that Twitter needs to “adhere to free speech principles fundamentally.”