Twitter shares fell on Monday after Elon Musk, the mercurial chief executive officer of Tesla, Inc. (TSLA), announced that he was trying to terminate his $57 billion ($44 billion USD) deal to acquire Twitter and take it private.
Musk’s attorney notified the Twitter board on Friday that Musk wants to cancel his impending purchase of the social media platform. Musk had taken issue with the number of bots and fake accounts on the site and continues to allege that Twitter was not being truthful about how many users and how much activity on the platform was actually fake.
Twitter’s board, on the other hand, says it had given Musk all the information he needed to evaluate their claim that spam accounts only make up 5% of monetizable, daily active users. The board chair, Bret Taylor, announced that Twitter plans to pursue legal action in Delaware’s Court of Chancery.
Musk responded by posting a meme on Twitter itself that featured him laughing at the idea that Twitter is now trying to force him to buy the company in court.. Still, Musk will now likely face a drawn-out legal battle and a $1.2 billion ($1 billion USD) fee for ending the purchase agreement.
In addition to Musk’s concerns regarding bots and fake accounts on Twitter, there’s speculation among investment analysts that the real reason he is leaving the deal has to do with his desire to renegotiate the price per share of $54.20 USD he had agreed to. On July 8, Twitter shares were worth 32% less than they were when Musk originally agreed to the deal on April 25.
At this point, current TWTR investors are likely looking to sell, given the uncertainty around the company’s ownership at the moment. But even when a public company is at its lowest point, there are inevitably always other investors willing to invest at a cheaper share price and profit from a possible comeback when the dust settles and the time is right.
How to Buy Twitter Stock in 5 Steps
1. Set Up an Account With a Broker
If you have a Registered Retirement Savings Plan (RRSP), you may be able to buy and sell shares of Twitter with your existing account. If you don’t have one—or if you want to invest your money for non-retirement goals—you will have to open an account with a broker.
Brokers act as intermediaries between you and the stock market, facilitating your orders to buy and sell stocks.
Brokers vary widely in terms of account minimums, fees and account types, so make sure you do your research and choose the right broker for your goals. If you’re looking for a simple and easy way to invest, check out our picks for the best online brokers.
Once you find a broker that fits your needs, you’ll be presented with a couple of account options, including retirement accounts and taxable investment accounts.
RRSPs offer valuable tax benefits, in exchange for locking up your money until retirement. Taxable brokerage accounts don’t have similar benefits, but you get much more flexibility. You can access your money without worrying about early withdrawal penalties, such as withholding tax, for example.
2. Review Twitter’s Financial Reports
As a public company, Twitter is required to file financial statements and annual reports with the U.S. Securities and Exchange Commission (SEC).
Twitter’s filings present a wealth of information for potential investors. They provide insights into the company’s current performance, risks facing its business model and plans for future development.
For example, in its latest quarterly earnings report, Twitter reiterated that its long-term plans do not involve maximizing its profit margins but rather investing in the business to drive growth in users. This is the sort of strategy that’s designed to build value over time, rather than driving up share price in the near term.
3. Decide How Much Money to Invest in Twitter
When thinking about how much money to invest in Twitter, consider the following factors:
- Current Price: As of writing, shares of Twitter are around $33 USD. Although some brokers allow you to buy fractional shares of stocks—slices of individual shares— only two brokerages in Canada (Wealthsimple and Interactive Brokers) have that option. If your broker doesn’t allow you to buy fractional shares, you’ll have to invest enough money to buy whole shares.
- Overall Portfolio: Deciding whether shares of Twitter makes sense for you as an investment is dependent on how they fit into your overall portfolio. You should not invest your money in just one or two companies; instead, spread your investing dollars among a variety of different companies in a range of industries, such as technology, consumer staples or utilities.
- Goals: Twitter has a proven track record, but it’s unlikely to have the dramatic returns that newer growth stocks provide. Because its performance is steadier, it tends to be a good investment for long-term investing goals rather than short-term investing or day trading.
4. Place an Order for Twitter Stock
To start buying shares of Twitter, open your brokerage account and enter Twitter’s ticker symbol—TWTR—along with the number of shares you want to purchase. Alternatively, you can enter the dollar value you’d like to invest if your broker offers fractional shares.
When you buy stocks, you can usually designate an order type. The most common options are market and limit orders.
A market order tells the broker to buy or sell the stock right away at the best available price. By contrast, a limit order only goes through once the stock reaches a specified price you pick. Limit orders can be a good idea if you expect a stock’s price to drop soon.
5. Be Aware of Currency Conversion Fees and Taxes
If you’re using Canadian dollars to purchase U.S. stocks, your brokerage will charge you 1% to 4% as a currency conversion fee on top of the regular exchange rate when you purchase the stock and when you sell it.
It is possible to avoid these fees, either by keeping your money in U.S. dollars and storing the funds in a U.S. dollar bank account at a Canadian bank or by performing a maneuver called Norbert’s Gambit with the help of your brokerage.
This so-called gambit is when you buy a stock or ETF that’s interlisted on American and Canadian stock exchanges. You buy Canadian shares of that stock or ETF, then you ask your brokerage to “journal over” your Canadian shares and turn them into American shares of the same stock, you then sell your American shares in U.S. currency and can use the U.S. dollars that result to purchase any American stock or ETF you want, like Amazon, without converting.
As for taxes, you will be subject to a 15% withholding tax if your U.S. investment produces a dividend. You won’t be taxed by the IRS at all if your investment vehicle is inside an RRSP because this particular registered account is recognized by the IRS, which isn’t the case for every registered account in Canada.
6. Monitor Your Investment’s Performance
Even if you intend on holding onto your Twitter shares for years, it’s still a good idea to periodically check in and review your investment’s performance.
A useful gauge is to compare its performance to the performance of major indices, such as the S&P 500, that provide an indication of how the stock market is performing as a whole.
What to Consider Before Selling Twitter Stock
If you need to sell your shares, you can sell them by entering TWTR in your trading platform and the amount you want to sell.
However, since selling shares at a profit may incur capital gains taxes, you may want to consult a tax professional to talk about when it makes sense to sell and strategies for minimizing your tax bill.
As a Canadian investor, you will likely only owe capital gains to the CRA (50% of the growth value) and not the IRS. The IRS only expects capital gains from you if you have a stake of 5% or more in an American corporation and that corporation’s primary asset is U.S. real estate.
In addition, if you happen to earn $5 million USD from your U.S. investments, your estate will owe estate tax when you die.
How to Invest in Twitter With Index Funds and Exchange-Traded Funds (ETFs)
While investing in stocks can be appealing for some investors, investing in a single company can be risky. If you would like to reduce your risk, you can get instant portfolio diversification by investing in index funds and ETFs.
Countless index funds and ETFs own shares of Twitter. Some popular options include:
- Communication Services Select Sector SPDR Fund (XLC). This ETF aims to give its holders exposure to the global communications and technology industry, including major players like Twitter.
- Invesco Dynamic Media ETF (PBS). As of writing, shares of Twitter are the top holding of the Investco Dynamic Media ETF, at 7.3% of the fund’s total portfolio.
- Vanguard Total Stock Market Index Fund (VTSAX). If you are looking for a broader index fund, consider the Vanguard Total Stock Market Index Fund, which aims to duplicate the performance of the entire U.S. stock market. In fact, we’ve picked VTSAX as one of the best total stock market index funds. Currently VTSAX owns nearly 3% of Twitter.
But remember, investing in U.S.-based stocks and ETFs is likely not the most cost-effective investment strategy for Canadians. To save on currency conversion fees and the exchange rate, you are best to open a U.S. dollar bank account or investment account so all the fees you’d usually incur can be avoided.