Hello friends. Let's find the Fair Value of Twitter using Prediction Markets and a bit of our own analysis.
Markets cited:
"Will TWTR be delisted from the NYSE by December 30?" (Polymarket) YES: 27%
"Will the Musk Twitter deal close before 2024 at any price?" (Manifold) YES: 49%
"Will Elon Musk pay Twitter a breakup fee?" (Manifold) YES: 68%
We aren't here to pretend any one of these outcomes are certain. We are here to play the game the way it was designed to be played, and find the probability of each outcome. If you disagree about our analysis, it should likely be on the basis of disagreement with our assessment of the outcomes, since the probability is not subjective. It's based on prediction markets, which can offer non biased data backed by real bets of physical cash from traders putting their money where their mouths are.
Case 1: Elon gets off clean. Twitter gaps down by 10%
Case 2: Twitter wins the lawsuit and Musk is forced to purchase Twitter for $54.20
Case 3: Twitter decides to re-negotiate for a lower buyout price. Let's say the new buyout price is at $45
Alternate 1: Elon sells his shares | 10% probability | Price return: -20% | Applies in ANY case.
Alternate 2: Twitter sues Elon for the 1 billion dollars. Twitter gaps up by 5%. | ONLY if Elon gets off clean!
Case 1: 50% probability | Price return: -10%
Case 2: 30% probability | Price return: +62%
Case 3: 20% probability | Price return: +30%
Alternate 1: 10% probability | Price return: -20%
Alternate 2: 62% probability GIVEN case 1 | Price return: +5%
Case 1: 0.50 * -0.1 = -0.05 (-5%)
Case 2: 0.30 * 0.62 = +0.186 (+18.6%)
Case 3: 0.20 * 0.30 = +0.06 (+6%)
Alternate 1: 0.10 * -0.20 = -0.02 (-2%)
Alternate 2: 0.50 * 0.62 * 0.05 = 0.0155 (+1.55%)
Add them all together. -5% + 18.6% + 6% - 2% + 1.55%
Positive expected value: 19.15%. Fair value of Twitter stock: $40
Our plan is to buy a bunch of shares of Twitter and hold onto them until this deal gets resolved.
Thanks for playing.
Markets cited:
"Will TWTR be delisted from the NYSE by December 30?" (Polymarket) YES: 27%
"Will the Musk Twitter deal close before 2024 at any price?" (Manifold) YES: 49%
"Will Elon Musk pay Twitter a breakup fee?" (Manifold) YES: 68%
We aren't here to pretend any one of these outcomes are certain. We are here to play the game the way it was designed to be played, and find the probability of each outcome. If you disagree about our analysis, it should likely be on the basis of disagreement with our assessment of the outcomes, since the probability is not subjective. It's based on prediction markets, which can offer non biased data backed by real bets of physical cash from traders putting their money where their mouths are.
Case 1: Elon gets off clean. Twitter gaps down by 10%
Case 2: Twitter wins the lawsuit and Musk is forced to purchase Twitter for $54.20
Case 3: Twitter decides to re-negotiate for a lower buyout price. Let's say the new buyout price is at $45
Alternate 1: Elon sells his shares | 10% probability | Price return: -20% | Applies in ANY case.
Alternate 2: Twitter sues Elon for the 1 billion dollars. Twitter gaps up by 5%. | ONLY if Elon gets off clean!
Case 1: 50% probability | Price return: -10%
Case 2: 30% probability | Price return: +62%
Case 3: 20% probability | Price return: +30%
Alternate 1: 10% probability | Price return: -20%
Alternate 2: 62% probability GIVEN case 1 | Price return: +5%
Case 1: 0.50 * -0.1 = -0.05 (-5%)
Case 2: 0.30 * 0.62 = +0.186 (+18.6%)
Case 3: 0.20 * 0.30 = +0.06 (+6%)
Alternate 1: 0.10 * -0.20 = -0.02 (-2%)
Alternate 2: 0.50 * 0.62 * 0.05 = 0.0155 (+1.55%)
Add them all together. -5% + 18.6% + 6% - 2% + 1.55%
Positive expected value: 19.15%. Fair value of Twitter stock: $40
Our plan is to buy a bunch of shares of Twitter and hold onto them until this deal gets resolved.
Thanks for playing.
Trade closed: target reached
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.