If Twitter is taken private, funds may be able to quickly rebalance because they tend to have only a fraction of a percent of their portfolio invested in the company, said Sam Campbell, partner at FUSE Research Network. Funds could hold on to their shares of Twitter until the social media company is taken private. At that point, they would receive the cash that Musk intends to distribute to existing shareholders.
Active funds likely have more flexibility than their index-tracking counterparts to decide whether to get rid of Twitter before the deal closes or wait to receive the cash offer, Campbell said. But regardless of management style, the amount of trading that Twitter will likely incur is “not really moving the dial,” especially compared to what occurs during other portfolio rebalancing events, he said.
A fund’s tax liability from the sale will depend on when it purchased its Twitter shares, but sales are unlikely to create “a crazy sticker shock to any kind of investor,” Campbell said.
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Article published on April 28, 2022