Twitter stock swings sharply as individual investors pile in

Social-media company’s shares on track for best month since February 2021.

Tesla chief Elon Musk’s takeover bid for Twitter has spurred a shares frenzy. Picture: AFP

Elon Musk’s bid to buy Twitter has triggered a frenzy in the company’s shares and options.

The social-media company’s stock has been on a head-spinning ride since the Tesla chief executive took a stake in the company and said he was angling to take it private in a $US43bn ($58bn) deal. The shares, which were trading below $US40 before he disclosed his position, jumped 27 per cent in a single session on the news.

Twitter shares have since swung wildly, including Monday’s 7.5 per cent jump. Although they pulled back on Tuesday, slipping 4.7 per cent to $US46.16, they remain on track for their best month since February last year.

Twitter responded to Mr Musk’s approach by implementing a poison pill, a legal man­oeuvre that makes it difficult for shareholders to build their stakes beyond a set point. Other potential suitors are also circling.

The social-media company’s fate remains uncertain, but that hasn’t kept individual investors and options traders from piling in.

“Twitter has been a favourite among retail investors since Elon Musk (became involved),” said Lucas Mantle, a data-science analyst at Vanda Research.

Purchases of the shares by individual investors in April have swelled to around 11 times the monthly average since 2020, according to the firm.

Twitter shares on Monday were the second-most popular among investors on retail brokerage Fidelity, with roughly an equal number of buy and sell ­orders, according to the brokerage’s website. Their popularity trailed only Tesla’s.

The big one-day moves in Twitter’s shares are reminiscent of the swings that have become a feature of the meteoric ascent in Tesla’s shares over the past two years. The electric-vehicle maker has often logged giant one-day swings as momentum-driven traders have piled into the stock.

“We don’t think it’s fundamentally driven,” said Brian Fitzgerald, senior equity analyst at Wells Fargo Securities, of the rally in Twitter shares.

Mr Musk’s move to take Twitter private has defied conventions and largely played out over the social-media platform. Some investors may be piling into the shares in hopes of an eventual deal, he said.

The Wall Street Journal reported on Monday that Apollo Global Management was also considering participating in a bid for Twitter.

“I’ve never seen this before,” Mr Fitzgerald said of the drama that has played out between Mr Musk and Twitter.

Some of the most actively traded options tied to Twitter in recent sessions have been call options that would pay out if the shares jumped to $US50 or $US55, according to Cboe Global Markets data. Calls give the right to buy shares at a specific price, by a stated date. Puts give the right to sell.

There may be more volatility for both stocks ahead of their earnings reports this month.

Options on Tesla – a favourite among derivatives traders – have also been popular ahead of the company’s results.

Calls tied to the shares jumping to $US1100 and $US1050 have been widely traded. Also in the mix: calls tied to the shares jumping to $US1200. The shares closed on Tuesday at $US1028.15.

Still, some traders have opted to avoid both companies in recent sessions, deeming the situation too unpredictable.

“The key takeaway is that they would rather not touch it,” said Amy Wu Silverman, a managing director at RBC Capital Markets, of some of her clients. “It becomes a challenging situation.”

The Wall Street Journal