When the government imposes a 15% anti-dumping tax on a commodity, its price rises in the domestic market and the stock price of the firm that manufactures the product rises. How would the world respond if, prior to the duty announcement, the concerned minister’s daughter-in-brother law acquired a big amount of the company’s shares and then sold them after the stock price had reacted? On Twitter, the hashtags #InsiderInformation and #MarketManipulation would be trending.
Assume news breaks that a middling company is about to be acquired by a turnaround superstar, the share price rises, the takeover news turns out to be a false alarm, the price falls, and it turns out whoever broke the news made a tidy profit shorting the stock (a short sale is one in which you sell a stock you do not own, expecting the price to fall by the time you have to take delivery of the shares – you sold when the price was high and bought the share when it was This would also clearly constitute as market manipulation.
What if this is done by a social media celebrity, such as Elon Musk, who has 93 million Twitter followers? (23 per cent of them might be bots, according to some estimates). Musk revealed his intention to acquire Twitter for $44 billion, or $54.20 per share (in American pop culture, 420 is a reference to cannabis, and Musk likes his stoner cred). The shares of tweeter were trading at $39-40 in late March and early April. On April 4, Musk stated that he owned 9% of Twitter, causing the price to skyrocket to more than $50 per share.
Since then, Musk has been tweeting requirements and second thoughts, the most recent being Twitter’s requirement that automated accounts account for fewer than 5% of its users. Twitter’s stock price has dropped to slightly above $38. There is widespread speculation that Musk may either back out of the offer otherwise demand a lesser price than the $54.20 per share he first suggested for the acquisition. The drop in the share price as a result of his reversal puts pressure on the Twitter board to accept a lower valuation.
Musk’s crypto wallet does not include a lot of loose change. His fortune is in Tesla shares. To finance his Twitter purchase, he must sell Tesla stock. Tesla stock has plummeted in response to this possibility. China, where Tesla has a significant manufacturing facility and wants to have its largest market, views Twitter’s permissive posture on large-scale China-bashing on the site with suspicion. Politics in the United States is poised to get nasty, especially when it comes to abortion. In the process, Twitter will serve as both a battleground and a target. There are compelling reasons for a businessman not to put himself in harm’s way.
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