Investment Bank Stifel Downgrades Twitter to 'Sell' Amid 'Full-Blown Elon Circus'

Twitter is headed for a “full-blown Elon circus,” investment bank Stifel wrote in a new report as it downgraded the social-media company's shares to "sell."

The bank issued its updated guidance this morning following news that Tesla CEO Elon Musk had filed paperwork with the U.S. Securities and Exchange Commission to take Twitter private in a $43 billion bid.

“We’re downgrading Twitter to a Sell following Elon Musk’s offer to take the company private for a ‘best and final offer’ price of $54.20 per share,” Stifel wrote in its report. “We believe this sets a near-term ceiling on shares, detaches the company from fundamentals, and offers significant downside risk if Mr. Musk decides to abandon his offer or sell down his stake.”

The bank had previously recommended that investors hold their TWTR shares. It also lowered its revenue estimates slightly, predicting Twitter would see $5.87 billion in 2022 and $6.98 billion in 2023—down from $5.98 billion and $7.08 billion, respectively.

Twitter shares started the day up 11% in premarket trading on Thursday morning, but by the afternoon were trading just under their previous day close at $45.70. 

The Tesla CEO has a long history of drawing the SEC’s ire for his market-moving tweets, including his “favorite crypto,” Dogecoin.

Musk’s stake in Twitter was already garnering some negative attention before he announced his bid to buy it in an all-cash deal. 

Just last week CNBC pointed out that Musk missed the deadline to disclose his position in the company—a requirement for anyone who owns more than 5% of a company’s common shares—by 11 days.  When Musk did reveal his 9.1% stake in the company on April 4, the share price rose 27%.

Thay delayed disclosure resulted in Twitter investor Marc Rasella filing a class action lawsuit against Musk. The lawsuit alleges that by delaying the disclosure, Musk made it possible to acquire shares at a lower price. 

It’s also worth noting that in 2018, the SEC charged Musk with securities fraud after he claimed to have secured funding to take Tesla private at $420 per share, sending Tesla’s price to rise 7% that “led to significant market disruption.”