Twitter Inc. (NYSE:TWTR) stock will be suspended from trading in the public market even as all signs point to Elon Musk completing the deal to take the social media company private.
What Happened: Twitter’s shares will be suspended from the NYSE, effective Friday, Reuters reported, citing information available on the exchange's website.
Musk has until Oct. 28 to complete the deal or face the risk of a legal battle with Twitter in the Delaware Chancery Court. Earlier this week, a Bloomberg report said the Tesla Inc. (NASDAQ:TSLA) CEO spoke to bankers via a video call, assuring them that the deal will close by the deadline.
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On Wednesday, Musk posted on Twitter a picture of him taking a sink to Twitter’s San Francisco headquarters, captioning it as “Entering Twitter HQ – let the sink in.”
He also changed his description on his Twitter profile to “Chief Twitt” and his location to Twitter headquarters.
Bloomberg separately reported that Musk has assuaged the concerns of Twitter employees by stating that he wasn’t planning for a 75% job cut at the company as it was previously reported.
Why It's Important: Suspension of trading occurs when an exchange intervenes and halts trading in security due to concerns around assets, operations, and financial information, among other things.
Section 12(k) of the Securities Exchange Act of 1934 mandates that, "If in its opinion the public interest and the protection of investors so require, the Commission is authorized by order to suspend trading in any security for a period not exceeding 10 business days."
As opposed to suspension, delisting will be done once the deal goes through. Ahead of delisting, shareholders will be given the option to surrender their shares in exchange for monetary compensation.
In Twitter’s case, Musk has agreed to pay $54.20 per share, or $44 billion, in total for the transaction. Those shareholders who picked the stock below the price could make a neat profit but those whose purchase price is more than the offer price may have to incur a loss on their investment.
Musk will likely announce a tender offer that will allow shareholders to surrender their shares. At a special meeting held in mid-September, Twitter shareholders gave their nod for the deal to proceed.
If shareholders want to retain shares, technically, they still have rights over the company, proportionate to the number of shares they hold. However, they can offload the shares only to a private buyer over the counter and this could be a tall order.
Price Action: Twitter shares closed Wednesday’s session at $53.35, up 1.08%, according to Benzinga Pro data. Given the stock is still trading at a discount to the per-share offer price, it could see some upward bounce in Thursday’s session, especially as the deal probability has increased.
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