As traders saw Monday in the premarket price action and strong follow in shares of Twitter Inc. (NYSE:TWTR), SEC filings can have a major impact on price action.
With respect to a new stake by Elon Musk of 9.8% in the social media stock, investors are trying to anticipate his next move with the company.
In other words, did Musk purchase shares of the company to be a passive investor, progress to an activist role, or even take the company private?
Brent Slava, head of the Benzinga Pro newsdesk, joined the PreMarket Prep Plus broadcast Monday with his observations on the filings.
Musk's 13G Filing: Slava said Monday’s release from the SEC was a 13G filing. The report is required when a party's ownership of stock exceeds 5% of a company's total stock issue. Musk’s filing was nearly double that at 9.8%.
In addition, Schedule 13G is a much shorter version of Schedule 13D, with fewer reporting requirements.
Is A 13D Filing Or Activist Stake Next: This is what investors who are purchasing shares of Twitter are anticipating will occur in the not-so-distant future.
Similar to the 13G, it is required when a purchaser takes over a 5% stake in a company. It is done because the investor has decided to take an “activist role” in the company.
In other words, the investor wants to engage with the company to instigate changes that may enhance shareholder value. On some occasions, when an activist cannot exact the desired changes, they attempt a hostile takeover. For Musk, that would be taking the company private.
The excerpt from Monday’s interview discussing these differences with Slava can be found here:
Expert’s Opinion: While Doug Kass of Seabreeze Capital Management flaunted his “short rental” of Twitter’s shares at $49.50 during premarket trading, widely followed Wedbush tech analyst Daniel Ives was taking the other side of the trade.
In his opinion, it's highly unlikely that Musk's stake in Twitter remains passive; he thinks Musk will change to an active stake.
TWTR Price Action: As of 2 p.m. EDT, investors are favoring Ives’ opinion on the longer-term implications of Musk’s investment.
After a much higher open ($47.87 vs. $39.31), the issue did not find a bottom ($46.86) until the latter part of the first hour of the session. Once that low was established, the issue embarked on a relentless move higher.
As of 2 p.m., Twitter had exceeded the premarket high, so far reaching $51.37, and was trading actively in the $50 handle.
It should be noted that Monday’s price action is taking place on monster volume. With two hours remaining, it had traded 210 million shares, compared to Friday’s volume of only 12.1 million.
Disclosure: the author of this article is long shares of Twitter. Inc.
