Shares of Twitter (TWTR) are in the spotlight yet again after Tesla's (TSLA) CEO Elon Musk made an offer to acquire the company for about $41B or $54.20 per share in cash. This comes just days after the executive rejected a seat on the social media company's board. The Fly notes that on April 4, Musk disclosed a 9.2% stake in Twitter and had later agreed to become a director and to acquire no more than 14.9% of Twitter's common stock. Following this morning's news, Stifel analyst Mark Kelley downgraded Twitter to Sell as he believes Musk's offer sets a "near-term ceiling" on the shares, detaches the stock's trading from fundamentals, and offers "significant downside risk" if the world's richest man decides to abandon his offer or sell down his stake.

OFFER TO BUY TWITTER: On April 13, Elon Musk delivered a letter to Twitter that contained a non-binding proposal to acquire all of the outstanding common stock of the company not owned by himself for all cash consideration valuing the stock at $54.20 per share. In a regulatory filing, Musk said that "This represents a 54% premium over the closing price of the common stock on January 28, 2022, the trading day before [I] began investing in the company, and a 38% premium over the closing price of the common stock on April 1, 2022, the trading day before [Musk's] investment in the company was publicly announced. The proposal is non-binding and, once structured and agreed upon, would be conditioned upon, among other things, the (i) receipt of any required governmental approvals; (ii) confirmatory legal, business, regulatory, accounting and tax due diligence; (iii) the negotiation and execution of definitive agreements providing for the proposed transaction; and (iv) completion of anticipated financing."

In a letter to Twitter Chairman Bret Taylor, Elon Musk added that, "I invested in Twitter as I believe in its potential to be the platform for free speech around the globe, and I believe free speech is a societal imperative for a functioning democracy. However, since making my investment I now realize the company will neither thrive nor serve this societal imperative in its current form. Twitter needs to be transformed as a private company. As a result, I am offering to buy 100% of Twitter for $54.20 per share in cash, a 54% premium over the day before I began investing in Twitter and a 38% premium over the day before my investment was publicly announced. My offer is my best and final offer and if it is not accepted, I would need to reconsider my position as a shareholder. Twitter has extraordinary potential. I will unlock it."

Twitter has since confirmed that the company has received an unsolicited, non-binding proposal from Musk to acquire all of the company's outstanding common stock for $54.20 per share in cash, adding that the Twitter Board of Directors will carefully review the proposal to determine the course of action that it believes is in the best interest of the company and all Twitter stockholders. According to Reuters, Twitter will host a town hall meeting with its employees on Thursday at 5 pm ET to discuss the news of the executive's offer to buy the company.

SELL TWITTER: In a research note partially titled "Full Blown Elon Circus," Stifel analyst Mark Kelley downgraded Twitter to Sell from Hold after Musk offered to take the company private for a "best and final offer" price of $54.20 per share. He believes this offer sets a "near-term ceiling" on the shares, detaches the stock's trading from fundamentals, and offers "significant downside risk" if Musk decides to abandon his offer or sell down his stake. The analyst, who also took this opportunity to adjust his estimates to account for the Russia/Ukraine conflict and inflationary pressures, maintains a $39 price target on Twitter shares.

Oppenheimer analyst Jason Helfstein also downgraded Twitter, but to Perform from Outperform, and suspended his prior $60 price target on the shares following the news. The analyst, who noted this is not the first time there has been an offer to acquire Twitter as Disney (DIS) came close to acquiring it back in 2017, but ultimately backed away from the deal, believes Twitter should trade at a 20%-30% discount to Snap (SNAP) on full-year 2022 revenue estimate, which would represent shares between $48-$54 per share based on his current estimates. Helfstein added that his estimates have not been adjusted yet for direct impacts to Russia and softening advertising demand in Europe.

PRICE 'SEEMS REASONABLE': Commenting on the news, Piper Sandler analyst Thomas Champion said "we are in uncharted territory" with Elon Musk's unsolicited bid to acquire 100% of Twitter for $54.20 per share. Musk's actions look binary as his offer claims to be final, Champion told investors in a research note. Should the board decide not to accept, it seems likely Musk will sell his stake, the analyst added. Champion sees a counteroffer as unlikely and finds it unclear if there are any regulatory hurdles that stand in the way of a transaction. Musk's decisive actions suggest the board will need to meet soon to evaluate the offer and a reading of the 10-K filing suggests it has recourse to delay or obstruct an offer they deem unsuitable, Champion wrote. He believes the price offered by Musk "seems reasonable." Champion keeps a Neutral rating on Twitter with a $46 price target.

Meanwhile, Wedbush analyst Daniel Ives told investors in a research note that he believes Tesla's CEO will ultimately own Twitter "after this aggressive hostile takeover of the company." It would be hard for any other bidders to emerge and the Twitter board "will be forced likely to accept this bid and/or run an active process to sell Twitter," Ives contended. The analyst added that while there will be a host of questions around financing, regulatory and balancing Musk's time in the coming days, ultimately based on this filing "it is a now or never bid for Twitter to accept." The next step will be Twitter's board officially reviewing the Musk's filing, said Ives, who expects "many twists and turns in the weeks ahead as Twitter and Musk walk down this marriage path."

Ives' peer at Wedbush, Twitter analyst Ygal Arounian, has a different take than the firm's Tesla analyst Ives, as Arounian thinks the deal "does not get done at this level" and that Twitter's board will not view the offer, or Musk leading a change in the company, as in the best interest of the company or shareholders. Twitter's board will also likely look around for other suiters, and "while it's hard to think of many in the public markets (particularly that would pass regulatory scrutiny), other private players could be interested and make competing offers," Arounian tells investors in a research note. The analyst also can see Musk as conceding and giving a higher offer. With a new CEO on board and recent efforts to increase product velocity and revenue generation around that, the Twitter board likes sees upside "in running the course here," contends Arounian, who keeps a Neutral rating on Twitter with a $45 price target.

BID MIGHT NOT SUCCEED: Deutsche Bank analyst Benjamin Black said he was not surprised by the news after Musk rejected a board seat and avoided being restricted to maximum 15% ownership. While he takes this bid "seriously," Black said investors should also consider the potential for the bid to not be successful and he thinks it remains unclear how Musk can "transform" Twitter as he promises. The analyst is skeptical given the non-binding nature of the offer, the need for incremental financing and Musk's own track record of unsuccessfully taking Tesla private. Black has a Hold rating and $35 price target on Twitter shares.

PRICE ACTION: In Thursday trading, shares of Twitter have given up their early gains to trade fractionally lower at $45.73, while Tesla's stock has dropped over 3% to $988.46.