Birds are singing as the Twitter share price soars 27% on Elon Musk’s investment

Why is Elon Musk interested in a social media company?

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Twitter headquarters

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Key points

  • The Twitter share price jumped 27% overnight 
  • Shares in the social media company flew higher amid news Tesla founder Elon Musk became its largest shareholder 
  • Musk now holds a 9.2% stake in the company after sharing free speech worries 

The world’s richest person and CEO of Tesla Inc (NASDAQ: TSLA) has managed to put a rocket under the share price of another US-listed company overnight. Specifically, the Twitter Inc (NYSE: TWTR) share price took flight after it was revealed that Elon Musk had taken a sizeable position.

Shares in the social media company had ascended more than 27% by the closing bell on Tuesday morning. Remarkably, the excitement resulted in an extra US$8.5 billion being added to Twitter’s market capitalisation during the session.

Let’s take a closer look at the details.

What’s behind Elon’s move into social media?

According to a securities filing, the billionaire has acquired approximately 73.5 million shares in Twitter. This significant investment places Musk’s stake at 9.2%, making him the largest shareholder in the company.

For those playing along at home, the electric vehicle visionary’s stake is worth around US$3.68 billion (A$4.88 billion). While Musk’s indication of skin in the game of the 16-year-old social networking site was embraced by Twitter investors, to others the move might raise eyebrows.

Musk has a track record of entrepreneurial success going all the way back to the early days of PayPal Holdings Inc (NASDAQ: PYPL). Since then, he has gone on to create some of the most defining companies of the modern era with Tesla and SpaceX. However, a social media company is a far cry from electric vehicles and reusable rockets.

However, prior to the news behind the Twitter share price unfolding, the technology futurist had shown an interest in the social media industry.

On 25 March, Musk kicked off a conversation on the blue-bird emblemed platform. Posing a question to his more than 80 million followers, Elon asked:

Following this, Musk toyed with various options for how to address the perceived free speech flaw of the platform. In doing so, the Tesla founder considered whether a new platform is needed while revealing he had given serious thought to starting his own.

What it all means for the Twitter share price?

Notably, some analysts have not ruled out the possibility of a buyout. Keep in mind that Elon Musk holds a net worth of approximately US$270 billion. Meanwhile, based on the Twitter share price, the social media company has a market cap of US$40 billion. This means the billionaire has the financial capability to make such a move.

For now, Musk sits atop the Twitter shareholder register with his 9.2% stake. The holding is more than quadruple that of the Twitter founder, Jack Dorsey.

Despite the leap upwards, the Twitter share price is still down 22% over the past year.

Motley Fool contributor Mitchell Lawler owns Tesla. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns and has recommended PayPal Holdings, Tesla, and Twitter. The Motley Fool Australia has recommended PayPal Holdings. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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