Zinger Key Points
- Wedbush analyst Daniel Ives sees four scenarios playing out if Twitter and Elon Musk meet in court.
- The analyst also sees the potential for a deal reached outside of court.
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A former Twitter Inc TWTR security chief has turned whistleblower, alleging the company knew of security and bot issues.
The information could support Tesla Inc TSLA CEO Elon Musk’s accusations the social media platform has downplayed bot issues. Here’s what one analyst has to say about the newest piece of information in the highly publicized acquisition of the social media platform.
The Twitter Analyst: Wedbush analyst Daniel Ives has a Neutral rating on Twitter and $50 price target.
Related Link: Hot Take: Twitter Investors Should Buy THe Tip Amid Whistleblower Allegations
The Twitter Takeaways: Ives says the whistleblower situation at Twitter “adds complexity” to the merger court case in a new note published Tuesday.
“A potentially major development in this case has been whistleblower case from former security chief and Twitter executive Peiter ‘Mudge’ Zatko which could give Musk a much needed small victory,”the analyst said.
Zatko is being subpoenaed by Musk’s legal team to appear in court as part of Musk's legal fight against Twitter to back out of a planned $44-billion acquisition. Zatko's deposition is set for Sep. 9.
Twitter is fighting to push through Musk's acquisition on the originally agreed upon terms.
“Zatko claims that Twitter does not have an accurate count of the number of spam and fake bot accounts on its platform which will be front and center for the Musk team when they speak to Zatko as this could significantly beef up its claims vs. Twitter,” Ives said.
Ives calls the whistleblower report a “huge potential win” for Musk.
“Up until the Zatko development, the Street was factoring in Twitter to have a clear win in the Delaware Courts in October.”
Ives said a new range of outcomes could occur with the Twitter lawsuit including a settlement, a breakup fee and the deal being enforced. Here are the four potential scenarios Ives sees:
1. Deal ends, Musk pays $1-billion breakup fee and walks away.
2. Musk forced to buy Twitter at $54.20 per share.
3. Musk settles with Twitter and pays damages ranging from $5 billion to $10 billion.
4. Musk wins court case and pays no breakup fee.
The other outcome weighed by Ives is a deal reached outside the courtroom.
“We also believe with the Zatko situation being a potential Pandora’s box situation for Twitter that the two sides could come to the negotiating table before the trial begins to try and resolve the Twitter $44 billion deal.”
A renegotiated deal could help Musk and Twitter avoid a “brutal Game of Thrones battle in Delaware,” the analyst said.
It's still likely Musk could buy Twitter at a renegotiated deal price of $50 per share, Ives said — which is Wedbush's price target on the stock.
TWTR Price Action: Twitter shares were down 1.57% at $39.41 midday Tuesday.
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