The past month has been one of the liveliest in global stock markets for a few years. US share prices have plunged, especially among over-valued tech stocks. Over the past 30 days, the S&P 500 index has lost 8.4% of its value, while the Nasdaq Composite slumped by 11.6%. And against the backdrop of crumbling market confidence, mega-billionaire Elon Musk made an audacious bid to buy Twitter.
The ‘Technoking’ bids for Twitter
By any measure, Elon Musk is one of the most social media-savvy individuals on the planet. And with a net worth of $232.5bn, he’s the richest person on Earth. Also, as the self-styled ‘Technoking’ of electric vehicle maker Tesla, he has a horde of fanatical fans. As a result, Musk has over 93m followers on Twitter.
But when Musk announced on 14 April that he’d made a $43.4bn hostile takeover bid for Twitter, I immediately wondered whether he was being reckless. By offering $54.20 per Twitter share, Musk would have to risk a fair slice of his personal wealth. On 22 April, he revealed a $46.5bn financing package that included $25.5bn in debt, including a margin loan of $12.5bn against his Tesla shares. At most, Elon might have to personally stump up $33.5bn to take control of Twitter. To me, this smells like a ‘top of the market’ deal akin to the most disastrous buyouts of 2007-08.
Three FTSE 100 companies I’d buy instead of Twitter
One big worry for Musk is that Tesla shares have crashed lately. On 4 April, Tesla stock closed at $1145.45. On Friday, they closed at $769.59, down over $375. That’s a collapse of almost a third (-32.8%) in under six weeks. Yikes.
Right now, I think it would be very risky indeed for Elon Musk to bid for Twitter, given market volatility. Indeed he tweeted on Friday that the deal was temporarily on hold, pending an investigation into bogus Twitter accounts.
Instead of betting mega-bucks on a perpetually loss-making tech firm, if I happened to be Elon Musk, I’d check out the deep value on offer from FTSE 100 shares. Up 0.5% in 2022, the Footsie has avoided the market meltdown seen in the US and elsewhere. Thus, here are three cheap shares I’d gladly buy instead of Twitter. All three are priced below the £35.9bn Musk would pay for Twitter.
| Company | Sector | Share price (p) | 12-month change | Market value (£bn) | P/E | Earnings yield | Dividend yield | Dividend cover |
| Vodafone Group | Telecoms | 118.1 | -16.1% | 33.5 | – | – | 6.4% | – |
| Lloyds Banking Group | Bank | 43.8 | -9.2% | 30.4 | 5.9 | 17.0% | 4.6% | 3.7 |
| Tesco | Supermarket | 281.2 | 21.8% | 21.4 | 14.3 | 7.0% | 3.9% | 1.8 |
If Elon Musk wants to own another tech firm, why not buy telecoms behemoth Vodafone Group, with a current price tag of £33.5bn? I would. Vodafone’s dividend yield of 6.4% a year would easily cover his financing costs. Or if he wanted to acquire 30 million British customers, he could buy leading retail bank Lloyds Banking Group for £30.4bn. Again, Lloyds’ earnings yield of 17% a year would easily cover his debt interest. That’s another one I’d buy. Finally, if Musk wanted the seize #1 spot in the UK grocery market, he could have Tesco for a mere £21.4bn. But I can’t see the Technoking wanting to become a boring old grocer! I’d be happy to though.