With Elon Musk’s offer to proceed with a $44 billion acquisition of Twitter, Clinical Professor of Finance and stock market expert David Kass at the University of Maryland’s Robert H. Smith School of Business says:
“At this moment it appears that the mercurial Elon Musk will reluctantly acquire Twitter for $54.20 per share prior to the recently extended trial date of October 28th as he originally agreed.
"However, if Elon Musk really does go through with this acquisition, Twitter will face an annual interest burden of nearly $1.2 billion on its debt. Roughly half of the $13 billion debt Musk is loading on Twitter is floating rate, meaning interest costs will increase as the Federal Reserve continues to raise rates. Twitter’s current interest expense is less than $100 million per year and it may not be free-cash-flow positive until 2025.
"If this acquisition is consummated, the shares will then cease to trade publicly but could be reissued as an IPO in the future."
Kass has served as an economist in senior positions with the Federal Trade Commission, General Accounting Office, Department of Defense, and the Bureau of Economic Analysis.
He also is active on Twitter (@DrDavidKass) and blogs about Warren Buffett, Berkshire Hathaway and the stock market.
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