Musk buys 9.2% of Twitter, but will he realise the growth implied in the share price?

Twitter, therefore, has a 36.5% probability of delivering the growth implied in its share price.

On Tuesday, April 5 2022 the business press was alive with the news that billionaire and ex-South African, Elon Musk bought 9.2% of Twitter (TWTR) for a reported $2.9 billion based on Friday, April 1’s share price.

Musk bought 73.5 million shares which pushed the Twitter share price up by 27.1% to $45.97 per share.

For more information on this news story, click here.

Musk is a frequent Twitter user with more than 80 million followers and posts “interesting” statements on Twitter from time to time.

We, at Global & Local Asset Management, believe that Musk should have asked himself this very important question before purchasing this block of Twitter shares: 

Is Twitter able to deliver the growth implied in the share price? 

We at Global & Local Asset Management would have advised Musk to consult New Age Alpha’s, “Avoid the Human Factor Score” to view the probability of Twitter NOT being able to deliver on the growth implied in the share price.

New Age Alpha’s “Avoid the Human Factor” tool on the New Age Alpha website scores over 6 000 shares globally including many JSE listed shares, and provides a score for Twitter at 63.5%.

This score of 63.5% indicates that Twitter has a 63.5% probability of NOT delivering on the growth implied in its current share price.

This probability can be switched over to state that Twitter, therefore, has a 36.5% probability of DELIVERING the growth implied in its share price.

The “H-Factor” strategy comprises developing probabilities that indicate the chance of a listed company NOT being able to achieve the growth implied by its current share price.

The probability uses the only two things we know for sure about a listed company, that is the current share price and the profitability of a company as reported in the published financial results. From these two data inputs, we can calculate the probability of the company being able to produce the results implied in the share price based on whether the company has done this in the past 16 reporting periods.

Simply put, the lower the Human Factor Score a listed share has, the lower the risk of holding that share in a portfolio. 

How does Twitter’s Human Factor Score compare to its peers?

By using Global & Local Asset Management’s, New York-based associates, New Age Alpha, who developed the Human Factor Score, online tool, we can see that, as mentioned, Twitter has a Human Factor Score of 63.5%, but Meta Platforms (Facebook) has a Human Factor Score of 12.6%.

Hence, if Musk had asked Global & Local Asset Management if he should buy Twitter shares, we would have responded that according to the current Human-Factor Score, we would rather have Meta Platform shares in a portfolio and not Twitter.

We must add that at Global & Local Asset Management, we do realise that share investing cannot always be this simplified as there might be many other factors to consider when investing in listed shares.

Neither are we advocating that Twitter or in fact Meta Platforms are good shares for individual investors to buy now or even at a later stage as this article is not about providing advice to individual investors.

Using a probability-based approach to portfolio management

Using a probability-based approach to stock selection, we identify and avoid the risks present when share investors interpret vague and ambiguous information inherent in share prices in a systematically incorrect way.

The Human Factor Score measures the probability of the listed company not generating the growth implied in its current share price.

The approach taken by Global & Local Asset Management is not to manage portfolios like a portfolio manager but rather to adopt actuarial techniques to asset management.

If you would like to know more about how the Human-Factor score tool works and how we “Avoid the Losers”, then please contact us at Global & Local Asset Management.


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Mauro Forlin

Global & Local Asset Management


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What happened to the .1% more recorded by the FSB on the original sale of these shares to Musk? Did it exist and were they sold on the price rise after Musks purchase? This seems to be his modi’s operandi – Drive a price up with a large purchase ( and the hype around the purchase) ..then take profit from the very price rise he created! He did it with Bitcoin and got away with it – is he doing the same with Twitter?

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