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Twitter faces concerns in its transition to Musk

As is well known, Elon Musk, the richest man in the world and CEO of Tesla, is close to buying the #15 social media player, Twitter, with a $44 billion deal that could take months (two or three at best) until Musk has secured funding, leaving Twitter along with its current projects and teams in limbo. During the transition period there are several issues regarding the changes that Musk can make, including the impact on Tesla.

Earlier today, CEO Parag Agrawal announced to employees via email that the company would enter a hiring pause and all existing job openings would be reviewed to determine if any “should be withdrawn.” He also announced an effort to reduce costs between marketing and travel, along with the departure of two of the main executives, that of consumer products, Kayvon Beykpour, and that of revenue, Bruce Falck, in a personnel reorganization, with the positions to  be assumed by Jay Sullivan. Falck was fired according to a tweet that he deleted.

“…leaders will continue to make changes in their organizations to improve efficiency as needed” -Agrawal.

This comes after Parag tried to reassure Twitter employees at a company meeting on Friday who were seeking answers regarding staff retention after Musk took over ownership of Twitter. A source close to Musk mentioned that he would not make such decisions until the deal is finalized, however, it was also leaked that there is already a tentative replacement for Parag, although his identity was not revealed. Parag will receive approx 42 million if he is fired within a year of the change.

“We need to continue to be intentional with our teams, hiring and costs” – Parag Agrawal

Another relevant issue would be the investigation by the SEC (US Securities and Exchange Commission) regarding whether Musk violated regulatory deadline to reveal he had accumulated a stake of at least 5% of Twitter. well as the FTC’s investigation into antitrust concerns.

The growth of the Twitter website compared to the same periods of last year in April (not yet reported), would have a -21.77% for the monthly growth and an increase of 89.93% for the annual. Twitter has a total of 4.5B in monthly traffic, with 21.7% in the US (991.61M), 15.4% in Japan (104.36M) and 5.5% in Turkey (251.33M). These data would mean a fall compared to the month of March.

In a more controversial move, Elon Musk also vowed to overturn Trump’s Twitter ban that occurred in January 2021 after he was accused that his tweets were encouraging criminal acts by his supporters such as the attack on the Capitol. This commitment was marked by his absolutist attitude to freedom of expression and the suggestion that Twitter needs to be more neutral and less “leftist”, which is worrying users who reacted negatively and asked for a better explanation on allowing the return of Trump and others. In addition,  governments are concerned that it would contradict the new Internet security laws along with the digital content rules in the UK and the EU, being one of the possible reasons why several investors are doubtful. Musk mentioned that temporary suspension is a better option in addition to the reduction in the expansion of artificial conversations by bots and users to generate debate on a specific topic and the limitation of the visibility of messages. Meanwhile, Trump said that he would not return to Twitter even if allowed and that he would prefer his social network “Truth Social Network”.

All of these issues have reduced Twitter’s market capitalization below Musk’s purchase price.

Twitter Technical Analysis

Twitter set a high in March 2020 at 19.98 from where the momentum began that marked its historical high at 80.62. The price then went down to mark a new low at the psychological level of 50.00 and 50% Fibo at 50.20, followed by a failure of maximums at 73.03 to fall to 31.41. Currently the price of the daily candle is at 44.85 with a high and a low price at 47.35 and 43.28 respectively. The fill of the gap seen in April is at 39.23, would mark a possible continuation of the downward trend with support at the March 20 level. If the latter is breached, the asset could retest the 21.36-28.05 area. On the flipside if it manages to overcome and maintain above the 50.00 level it could extend its bullish momentum to test highs at the 70.00 level. The volume seen from April to date is the largest in its history.

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Aldo Zapien

Market Analyst – Educational Office – Mexico

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