On Friday, October 28, 2022 the long-running and contentious acquisition of social media platform Twitter by Elon Musk was completed at the agreed price of just over $59 billion ($44 billion USD).
Musk, who posted a tweet saying “the bird is freed” in reference to his ownership of the micro-blogging site, owns all the shares in the site once payments to shareholders was finalized.
Trading in the shares on the New York Stock Exchange has been suspended, meaning no new purchases of the stock can be made.
Shareholders were paid $70.34 ($54.20 USD) for each share they held up to the time of acquisition.
The decision by Musk to take Twitter private means the company will de-list from the stock market, having been listed on the New York Stock Exchange while a public company.
At the time, Musk was expected to change the way Twitter functions. It was speculated that he would alter the site’s algorithm, reduce moderation, introducing a user edit facility, and lifting bans on figures excluded by the previous management. Some of those measures have already happened, such as merging Twitter Inc. with parent company X Corp. as of April 2023.
While it’s unclear what this means for Twitter, Musk once described buying Twitter as an accelerant for creating an “Everything App” also called X that seems similar to China’s WeChat. To that end, further developments could see Twitter’s scope expand so that the app becomes a multi-purpose life management tool with a range of administrative functions.
At the close of trading on October 27, Twitter shares were priced at just over $71 ($53 USD). The New York Stock Exchange issued a notice saying the suspension of trading in the shares was “Effective before the Open” of the market at 9.30 a.m. EST.
How to Buy a Stock
1. Set Up an Account With a Broker
If you have a Registered Retirement Savings Plan (RRSP), you can buy a stock 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 Financial Reports
All American public companies are required to file financial statements and annual reports with the U.S. Securities and Exchange Commission (SEC).
These 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 last 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
When thinking about how much money to invest in any company, consider the following factors:
- Current Price: Always consider the current share price of the stock you are buying. 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 a company make 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 had a proven track record, but it did not have the dramatic returns that newer growth stocks provide. Because its performance was steadier before Musk bought the company, it tended to be a good investment for long-term investing goals rather than short-term investing or day trading.
4. Place an Order for Stock
To start buying shares, open your brokerage account and enter the company’s ticker symbol— in this case, it was 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 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 Stock
If you need to sell your shares, you can sell them by entering the ticker symbol 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 a Stock 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 once owned shares of Twitter. Some popular options included:
- Communication Services Select Sector SPDR Fund (XLC). This ETF aims to give its holders exposure to the global communications and technology industry.
- Invesco Dynamic Media ETF (PBS). Twitter was once 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. When the company was public, VTSAX owned 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.
