Twitter is in the news these days. Controversy seems to follow the company, and its visibility far exceeds its size and actual presence in the social media world. Controversy gets noticed, and some investors are wondering how to buy Twitter stock or if it would be a good idea even if they could.
Twitter (now X) has been a privately held company since Elon Musk’s highly publicized buyout, which was finalized on Oct 27, 2022. It is no longer possible to buy Twitter stock on any public exchange. Twitter is now owned and operated by the Musk-owned X Corp.
It is sometimes possible to buy shares in privately held companies. You may need to meet certain qualifications, and there is no assurance that shares in any given company will be available. There are also significant risks.
Let’s take a closer look at the company, how to buy Twitter stock, and some of the pros and cons of buying Twitter stock.
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What Is Twitter (X)?
We should probably have a word about Twitter itself before we discuss how to buy Twitter stock:
Twitter has already been through this process. It traded publicly from 2013 to 2022 and was then taken private after a high-profile buyout. Let’s look at how that process played out and what it means to potential new investors.
Twitter is a social media platform founded by Jack Dorsey, Noah Glass, Biz Stone, and Evan Williams in 2006 as a spinoff from the podcasting tool Odeo.
Twitter was one of the early players in social media, along with Facebook (2004), YouTube and Pinterest (2005), and LinkedIn (2006).
Twitter was built on a short message format, allowing users to send and resend photos, videos, and comments. The platform initially surged. In 2009 Twitter won a “Breakout of the Year” Webby Award and was the third-largest social media site. By June 2010, users were sending 65 million tweets a day. In 2011 Twitter was hailed as a key method of information dissemination enabling the Arab Spring revolts.
Twitter went public in 2013 with shares priced at $26, achieving an initial valuation of $14 billion. Within a day, the shares rose 73% to $44.90.
The company’s momentum faded in 2014 and 2015, with user growth slowing, especially relative to competing platforms, and the company struggling to attract advertisers. Twitter posted consistent losses even as other social media players moved into profitability.
While the volume of tweets remained high, an increasingly large percentage of tweets were coming from a small number of users.
In the increasingly charged political environment of 2016 and the ensuing years, Twitter became the preferred venue for confrontational and sometimes abusive content. Twitter briefly achieved profitability in 2019, but the user count continued to dwindle, and losses soon resumed.
During the COVID-19 pandemic, Twitter was simultaneously accused of being a vehicle for medical disinformation and of censoring alternative views.
Twitter’s management was left in a near-impossible position, caught between political activists demanding the right to publish anything they wanted and advertisers demanding “brand safety”, primarily meaning assurance that their brands would not appear beside content they considered distasteful.
Enter Elon Musk
If you want to learn anything about how to buy Twitter stock, you should probably learn from the biggest buyer of these stocks, Elon Musk:
Billionaire investor Elon Musk was one of Twitter’s most prolific and most controversial users. In March 2022, he had over 77 million followers and was routinely posting 30 or more tweets a day.
Musk’s tweets were often controversial. In 2018, the Securities and Exchange Commission fined Musk $20 million and ruled that Tesla lawyers must approve tweets on the company to avoid violations of SEC rules. Musk’s tweets dealing with Bitcoin and Dogecoin drove large swings in the price of the cryptocurrencies and raised concerns over market manipulation.
Musk was also a vocal critic of COVID restrictions and Twitter’s policy on controlling what was regarded as COVID-related misinformation.
In January 2022, Musk began purchasing Twitter shares, and by March, he was the single largest holder, owning 9.2% of the shares. On April 14, 2022, Musk made an offer to purchase Twitter for $44 billion, stating:
I invested in Twitter as I believe in its potential to be the platform for free speech around the globe.
After initial resistance, Twitter’s board accepted the offer on April 25.
Musk subsequently sold $8.5 billion in Tesla stock to help finance the deal and raised another $7 billion in financing. Reports indicated that Musk intended to increase revenues 5x and bring annual earnings to $26.4 billion.
Musk later tried to back out of the deal, claiming that Twitter had supplied inaccurate figures on the number of inauthentic accounts. After the case went to court, the deal was finally concluded on October 28, 2022. Twitter became a private company owned by Musk.
Musk used $13 billion in loans from a consortium of banks to help finance the acquisition.
Twitter After Musk
Musk made immediate, dramatic, and sometimes chaotic changes to Twitter, numerous senior executives were dismissed, and as much as half the workforce was fired, leaving many functions unattended. Content moderation and media relations teams were dismissed. Moderation was drastically reduced, and previously banned accounts were reinstated.
Observers documented an immediate spike in tweets that would formerly have been classified as hate speech. Some accounts indicated that half of Twitter’s advertisers left the platform, including major spenders like Coca-Cola, Unilever, Jeep, Wells Fargo, and Merck.
The same source claims that monthly revenue from the top 1000 advertisers dropped from $127 million to just over $48 million.
Musk’s Twitter began charging for the blue checks that had been used to designate verified identities, an effort that soon backfired as impersonators rushed to buy “blue check” status for fake accounts.
On Dec. 18, 2022, Musk asked Twitter users if he should step down as the head of the company, promising to abide by the results of the poll. 57.5% of respondents voted “yes”.
In May 2023, Musk made good on that promise, stepping down as CEO and appointing former NBCUniversal executive Linda Yaccarino to succeed him. Yaccarino is a career advertising executive and will face the task of bringing desperately needed ad revenue back to the platform, reconciling the interests of free-speech absolutists with those of advertisers demanding brand safety.
What Does All This Mean for Potential Investors?
It’s unusual for a public company to be taken private and even more unusual for private company investors to be looking for ways to invest in such a company. There are two things that make Twitter different.
- Elon Musk. Musk has a reputation for building shareholder value. He’s a very public figure, and companies that he’s involved with always attract attention.
- Twitter’s controversies. Twitter is not a major player in the social media world, but it gets attention and has become a political issue. Individuals who share Musk’s vision of what Twitter could be may wish to invest in the company.
Whether these points of interest outweigh the obvious potential risks is another question.
Twitter’s current valuation, according to Fidelity (which helped to finance Musk’s purchase and owns a stake in Twitter), is $15 billion, a third of what Musk paid for the company. Going public at this stage would involve a massive loss. That makes a public listing in the near future highly unlikely.
Twitter has issues. It is only the tenth most popular social media site, with 217 million Monthly Active Users. That is tiny compared to Facebook (2.9 billion), YouTube (2.2 billion), or WhatsApp and Instagram (2 billion each).
Twitter has also shed advertisers, its primary source of revenue, who can easily move to other platforms. This is a characteristic feature of social media: there is no moat at all, and advertisers (the customers) can easily drop a platform and move to another.
Musk has plans to reverse that trend. Twitter is to become a “digital town square” devoid of bias. It will be an “everything app” combining public and private messaging, information sharing, digital payments, e-commerce, and other functions, as TenCent has already done in China.
How and when this is to be achieved remains to be seen.
What Do We Know About Twitter’s Financials?
Twitter is a private company and is not required to file financial reports. Until – and unless – the company prepares to go public and files a prospectus, we will not have access to detailed financial records.
Twitter’s last reported full-year revenues were $5.1 billion in 2021. Revenues in Q1 2022 were $126 million, dropping to $30 million in Q2, its last report as a public company. A report on June 5, 2023, citing an internal presentation, stated that year-over-year revenues had declined 59%.
Musk’s mass firings have reduced costs dramatically, but Twitter also has to make interest payments on the $13 billion in debt used to finance the acquisition. Musk himself estimates Twitter’s costs at $3 billion a year, including $1.5 billion in interest payments.
The same interview stated that Twitter could break even in Q2 2023 and could become cash flow positive in 2023.
All of these figures are estimates and cannot be confirmed.
How to Buy Twitter Stock
Twitter is a privately held company, and its stock does not currently trade on any public exchange. You will not be able to buy Twitter stock through a conventional broker until the Company holds an IPO.
It is sometimes possible to buy shares in private companies through private share marketplaces. These marketplaces acquire shares or broker shares being sold by early investors or by employees who have received shares as part of their compensation.
This is not a sure thing. Shares in any given company may not be available at any given time, and there may be restrictions on who can buy private company shares. If you’re convinced that a company has a bright future, it’s still worth a try as long as you have fully considered the risks of private company investing.
As of June 2022, the private company market presents a unique opportunity for investors with a long time horizon and cash that they are willing to place in a high-risk investment (all private company investments have to be considered high-risk).
Today’s flat IPO market has led to a radical drop in demand for private company shares. Investors are reluctant to buy shares that may remain illiquid until the IPO market improves. Significant numbers of employees in private companies are looking to offload shares. That increased supply and lack of demand point to increased availability and more accessible pricing for private company shares.
How to Buy Twitter Stock: Secondary Market Transactions
These marketplaces often impose investor qualifications, and there is no guarantee or assurance that they will have available shares in any given private company.
- Forge Global merged with Sharespost in 2020. The combined company is now the world’s largest marketplace for private company shares. Investors must make a minimum purchase of $100,000 worth of shares. The minimum may be higher for some companies. Investors may need to meet qualification requirements.
- EquityZen acquires shares from early investors or from employees who have received stock as part of their compensation. They work with companies to assure that transactions will be recognized and sell the shares to investors who meet the revised SEC “accredited investor” criteria. There’s a minimum investment of $10,000, which may be higher for some companies.
- Nasdaq Private Market provides access to private-company shares for investors who meet the SEC’s accredited investor criteria.
- EquityBee is a private marketplace that allows investors to fund employee stock options in return for a share in the proceeds of an eventual sale.
Most private company transactions must be approved by the issuing company, Beware of unknown platforms offering shares. They may not be approved or legally tradeable.
⚠️ There are substantial risks in private company investing. An IPO may not take place as expected, and if it doesn’t, there may be no market for your shares. Learn more about private company investing.
How to Buy Twitter Stock: Invest in the IPO
If private company shares are unavailable or the requirements are too strict, investing in the IPO may be a better option. Many IPOs allocate limited numbers of shares to major brokers, and if your broker has a shared allotment, you may be able to buy at the IPO. You may still need to meet the qualifying requirements.
You’ll have to tell your broker how many shares you’d like to buy, and there’s no guarantee that you’ll get that number or any allocation at all.
Several major brokers provide IPO investing access for clients. Different brokers have different requirements.
- Charles Schwab requires a history of 36 trades or an account balance of at least $100,000 for IPO participation.
- E*Trade has no account balance or trading history requirements for IPO participation. You may have to pass a questionnaire provided by the IPO underwriters.
- Fidelity allows IPO participation for clients who meet a minimum household asset requirement or are members of their Private and Premium client groups.
- TD Ameritrade allows IPO participation if they are part of the selling group. Participants must have a minimum account balance of $250,000 or have made 30 trades in the last calendar year.
Buying at the IPO has one major advantage over a private company purchase. At least you know that after the IPO, there will be a public market for your shares. You may not be able to take immediate advantage of that market, though. IPO share purchases typically come with a 30 or 60-day lockup period.
There is no assurance that Twitter will ever hold an IPO.
How to Buy Twitter Stock: Invest After the IPO
If you’re convinced that Twitter will be a good long-term investment you may be wondering how to buy Twitter stock. Well, the simplest way to buy the stock is simply to wait until the IPO concludes. You can then buy through your regular broker with no restrictions or requirements. You’ll be able to sell the stock at any time you like.
You will not get the low per-share price that you’d get from a private company or even an IPO investment, but you’ll face substantially less risk. You’ll also get a chance to see how the market responds to the IPO before you pull the trigger.
If the stock rises immediately after the IPO, your entry price will be substantially inflated, but that is by no means guaranteed. If you intend to hold the stock for an extended period, the difference will probably be minimal.
Are There Any Concerns About Twitter?
Any private company investment involves substantial risk. There is never any assurance that the company will go public or that there will ever be a liquid market for the shares.
In addition, there are specific concerns about Twitter.
- There is no assurance that Twitter shares will be available for purchase.
- Twitter has barely completed the transition from public to private. There is no assurance that it will ever go public again. If you are able to acquire shares, there may never be a market for them.
- Twitter’s revenues have dropped dramatically, and there is no assurance that its owner’s plans to rejuvenate and expand the business will succeed.
- Elon Musk’s involvement attracts investors, but it is also a risk factor. Musk is as eccentric as he is brilliant, he has numerous other commitments, and there’s no assurance that he will retain an interest in Twitter.
- Musk’s plan to minimize moderation may run afoul of regulators in key markets and could create liability if the platform is used to plan or expedite illegal activities.
You should review all of these and other risk factors before you consider an investment in Twitter.
Twitter is currently one of the most visible and widely discussed companies in the world. That invariably attracts attention from the investment community, and many investors are wondering how to buy Twitter stock.
If you’re considering an investment in Twitter, you will have a great deal to consider. All private company investments are risky, but Twitter presents an unusual case with a special set of risks.
Of course, that may change, and even if you don’t see Twitter as a viable investment – or if shares are simply not available – right now, that may change at some point in the future!