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This is more of a note to the search engines than it is to us sophisticated investors here. But Twitter is not, as in the Monty Python phrasing, pining for the fjords, it is not resting, it is dead, gone, it is an ex-stock.
Twitter was delisted from the NYSE on 8 November. As something that we can trade, it simply doesn’t exist anymore.
Twitter the company
Twitter the company still exists, it’s now a wholly owned subsidiary of X Holdings II, which is again wholly owned by X Holdings I, which is wholly owned by Elon Musk. OK, so we all knew that Musk bought Twitter, right?
There might be some shuffles in that ownership structure as there were others providing capital, people rolling their Twitter shares into the private company and so on. But for us out here, retail investors, there’s no entry point.
Twitter the business continues to trade – we can look at Twitter feeds to see that – and as the vast tide of articles about what Musk is doing to Twitter show us there’s still activity.
Investable Twitter
But for us out here, there’s no way to trade Twitter equity. We could, in theory at least, make a private contract with someone linked to some notional link to Twitter and its performance. There’s a Twitter bond out there that could be traded (although I’d suspect a very thin market for it). But to all useful intents and purposes, Twitter as an equity possibility is that dead and gone, expired.
The formal note on this is here:
NOTIFICATION OF THE REMOVAL FROM LISTING AND REGISTRATION OF THE STATED SECURITIES The New York Stock Exchange hereby notifies the SEC of its intention to remove the entire class of the stated securities from listing and registration on the Exchange at the opening of business on November 08, 2022, pursuant to the provisions of Rule 12d2-2 (A). [ X ] 17 CFR 240.12d2-2(A)(3) That on October 27, 2022, the instruments representing the securities comprising the entire class of this security came to evidence, by operation of law or otherwise, other securities in substitution therefore and represent no other right except, if such be the fact, the right to receive an immediate cash payment. The merger between Twitter, Inc. and X Holdings II, Inc., a wholly owned subsidiary of X Holdings I, Inc., wholly owned by Elon R. Musk became effective on October 27, 2022. Each share of Twitter, Inc. Common Stock was exchanged for USD 54.20 in cash, without interest and less any applicable withholding taxes. The Exchange also notifies the Securities and Exchange Commission that as a result of the above indicated conditions this security was suspended from trading before market open on October 28, 2022.
It just seems appropriate to point out the passing of a stock as well as its arrival. We do, after all, all write – and read – torrents about an IPO or flotation, so it seems fair enough to market the end of the quoted existence as well.
The Twitter bonds
There are two entirely different sets of Twitter bonds out there. It’s important to grasp this, that the bonds that most people will generally be thinking about are entirely different from the other set. Effectively, there are the bonds pre-Musk and the bonds post-Musk.
Pre-Musk bonds include a convertible – convertible into Twitter stock – which is really of no interest to anyone. There appears to be $353,000 outstanding which is the sort of amount that can get lost down the back of the couch in bond markets. In fact, this probably is something lost down the back of the couch, those last little scraps that didn’t get tendered into Musk’s offer. There are, if you can believe it, small amounts of nearly any and every security ever issued still lying at the bottom of safety deposit boxes somewhere. The company got taken over, went bust, through Chapter 11, something, and those securities just never were sorted out at the time.
There are then the 2019 issued 3.875% which is due in 2027 and the 5% due in 2029. That last was issued this year as the previous management issued debt to be able to buy equity to stave off Musk’s bid. That worked well.
Both of these are trading just under par, which isn’t all that surprising as there’s a call on them. Both issues have a change of control provision, meaning that holders can tender them into Twitter in the event of a takeover bid succeeding. As per this announcement:
On October 28, 2022, Twitter commenced offers to purchase for cash any and all of its outstanding 3.875% Senior Notes due 2027 (the “2027 Senior Notes”) and 5.000% Senior Notes due 2030 (together with the 2027 Senior Notes, the “Notes”) at an offer price equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest to, but excluding, the date of purchase (collectively, the “Change of Control Offer”). The Change of Control Offer is being made pursuant to certain provisions in the indentures governing the Notes which require Twitter to offer to purchase the Notes following the occurrence of a “Change of Control Triggering Event” (as defined in each indenture).
That purchase price is, by the initial prospectus, 101% of par. Given that interest rates have risen considerably since either issue (and that 3.875% was considered to be at a very, very, fine price even back then) it’s that call on them which is holding the price up. A yield to maturity of 4.3% (on the 3.875% bonds) really isn’t attractive in the current market. Sure, they’re pretty short-term to maturity but all the same, much better can be done elsewhere. So, if anyone ends up not tendering these bonds into the offer, then the price is likely to fall pretty considerably. Well, considerably by bond prices, of course.
The other set of bonds
The other set of Twitter bonds is those that Musk is using to finance the takeover itself. We can’t trade these as yet. The reason being that the banks agreed to lend the money – or issue junk bonds at a price – and set the price of that lending back in the spring. Interest rates have risen considerably since then. So, having set the price back then, if they issue the bonds now then they’ve got to book a huge loss.
That’s not what they really want to do, of course. This is also a detail of “mark to market” accounting. If those junks bonds are sold, then the 11.75% (which some say was the agreed price) is going to fall, given that the current likely yield today for the same credit risk is 15%. There’s even a rumor that some hedge funds have offered to take the entire issue at 60% of par. If the underwriting banks don’t sell the bonds they can – implausibly perhaps, but legally – claim they’re holding them to maturity, and thus they don’t have to mark them to market. They might still end up losing money, but it’ll be less embarrassing this way. It also won’t be crystalized in quite the same way, it’ll be more of an opportunity cost than a “real” one.
So, on the bonds
There’s the convertible, which is pretty much done. The prices of the pre-Musk bonds are currently supported by the buy in. Given that the price will slump if not sold into Twitter it’s likely that nearly all will. We’d not want to go long there and, well, if there are none left after the offer period then there’s not much opportunity to go short either.
The new, post-Musk bonds aren’t on the market yet given the potential, umm, embarrassment of those who priced them. So, while there are other instruments than the equity, it’s still pretty difficult to trade them.
My view
Well, this being pretty basic and factual, it’s not really necessary for me to have a view. The background to this really just being that someone, somewhere, probably should put up a piece simply to say – Twitter’s gone as a stock. Also, that the bonds don’t look – currently, that is – as if they offer an interesting opportunity.
The investor view
What this means for us as investors. Well, if you hold – still – some of that formerly quoted stock, then the only thing that can be done is to tender it to Musk (or X Holdings II) and receive that cash payment. Anyone holding through a broker, this will already have happened. If it hasn’t, shout at your broker. There will be no one who isn’t holding through a broker – or at least without electronic registration of their stock. Twitter floated originally long after the end of paper-based stock certificates. So there’s no set of shares lying in the back of a drawer anywhere.
Bonds, well, as above, there’s nothing much we can get our teeth into currently. If, as and when, those junk bonds hit the marketplace, then they could be a way to play opinions on Musk’s likely success or not.
Shrug. Twitter as an investment game is over. Well, it is until Musk decides to refloat it after he’s sorted it out.
The point of this little piece is simply to draw a line under the adventure, to provide that end note.
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