Twitter is dominating business and social media headlines once more following the news that Elon Musk, the multi-billionaire owner of electric vehicle manufacturer Tesla, is terminating his $US44 billion deal to take over Twitter. In response, Twitter is suing Musk, claiming his exit strategy is a “model of hypocrisy”.
Musk cited material breach of multiple provisions of the agreement, causing shares of Twitter, which are quoted on the New York Stock Exchange, to fall 6% in extended trading.
Earlier this year, the Twitter Board recommended that shareholders approve the deal, and Musk had previously expressed a desire to take the company private.
However, in May, Musk put his $44 billion deal to acquire Twitter (TWTR) on hold, citing issues around the number of spam accounts. At that time, he had asserted that Twitter needed to prove that fewer than 5% of active users were fake accounts.
Bret Taylor, Twitter’s chairman, previously said (in a tweet) that he is determined to complete the takeover on the original terms: “The Twitter Board is committed to closing the transaction on the price and terms agreed upon with Mr. Musk and plans to pursue legal action to enforce the merger agreement. We are confident we will prevail in the Delaware Court of Chancery.”
In the past year, Twitter shares have been as low as $31 and as high as $73. Musk himself has a huge following on Twitter, notching up more than 100 million followers recently—only the sixth user of the social media site to do so.
How do I buy Twitter shares?
If you want to buy Twitter shares, you need to set up a trading account with an investment platform or use a dedicated share trading app.
As Twitter is traded on the New York Stock Exchange (NYSE), you will need to make sure that your trading platform of choice offers access to international shares. Make sure you’re well aware of any international transaction and brokerage fees in advance.
You can also opt to buy Twitter shares indirectly through a managed fund or an exchange traded fund (ETF), a type of pooled investment security, but once again check the fee and product disclosure documents carefully.
Buying US shares
The ticker symbol for Twitter is TWTR. The New York Stock Exchange in the US is open for trading from 9.30am to 4pm (US Eastern Time).
You should be able to buy US shares through most brokerage accounts, but be aware that, unlike local shares, you will not be entitled to a franking credit, because the US does not share our dividend imputation system.
You will be asked to complete a W-8BEN form (valid for three years) which allows you to benefit from a reduction in withholding tax for qualifying US dividends from 30% to 15%. This form will need to be updated any time your details change, including your address. If you don’t complete this form you are liable to be hit with a higher withholding tax rate.
Holding US shares also carries exposure to foreign exchange risk. If the Australian dollar strengthens against the US dollar, your shares will be worth less in AUD (and vice versa).
How to sell Twitter shares
At some point, you will want to sell your holdings. To do so, log in to your investing platform, type in the ticker symbol (TWTR) and select the number of shares you want to sell.
Note that if you’ve made a substantial profit, you may be liable to pay Capital Gains Tax (CGT) which will be added to your tax return.
The good news is that if you have held these shares for more than 12 months you may be entitled to Australia’s Capital Gains Discount and only have to pay 50% of the capital gains tax.
Once again: speak with your accountant or financial advisor for more information.
What to remember when buying shares
First, and most importantly, there are no guarantees when it comes to share prices. They can and often do fluctuate minute by minute, gains can quickly become losses, and in the worst case scenario, you can lose all of your investment.
In other words, don’t buy Twitter or any other shares thinking you are on to a sure-fire winner. There is always risk involved, and you should be fully aware that you could make irretrievable losses.
However, if you understand and accept the risks, you could view share investment as a potential way to make more of a profit on your capital than you would be putting your cash on deposit.
Here are a few golden rules:
- Know your limits: when buying shares, only invest what you can afford to lose
- Stay secure: build a solid financial base for your finances before venturing into investment – at the very least, have three months’ worth of normal outgoings as a cash reserve in a rainy day fund
- Avoid ‘leverage’: this is where you borrow to invest. This take the basic risk of investment and makes it toxic since there’s a danger of losing someone else’s money, not just your own
- Minimise charges: as you’ll have seen from the articles above, the charges levied by investment platforms and apps can eat into the value of your holdings, so scrutinise these with care
- Spread your bets: experienced investors reduce their risk profiles by investing across a range of companies, or by buying funds which themselves have exposure to a range of investments
- Do your research: knowing when to sell is as important as knowing when to buy, so keep an eye on your portfolio to see if action is required – your platform or app should be able to help in this regard
- Think long term: an opportunity such as that presented by Twitter is eye-catching, but shares investment should be regarded as a long-term – ideally, five-year – proposition to allow time for sustained market growth.
Note: investing in companies comes with no guarantees. When buying company shares, it’s possible to lose some, and very occasionally, all of your money. Past performance is no prediction of future performance and this article is not intended as a recommendation of any kind.