I don't immediately buy the logic of "Stock A hit a peak of $X last year, therefore that is the correct price/valuation, and not the lower price it is right now"
If Twitter was worth more, it'd be worth more.
With that logic, you should put a huge chunk of your savings into Twitter to benefit from the insight, as it's currently trading at 39% below its 52-week high.
Indeed, note that the only rational reason not to buy TWTR right now is the simultaneous belief that (a) it's not underpriced but also (b) Musk will never [be allowed to] make the purchase. If you disagreed with either of those statements, then it would be irrational not to buy TWTR, because either way you'd profit.
The argument is not that is worth more, it is that it can be worth more in the future than Musk offer. No one can predict the future, but it is a legitimate reason to believe it can be worth more than $54 in the future and pointing that it was worth more last year is just an argument for the belief. Which makes sense to me.
As legitimate as it is to believe that the stock price will never again reach $54.
The disconnect between you two seems to be an understanding of what the price of a stock means.
The stock price today represents what investors think the future value might be. The speculation that the dip will bounce back is built into today's price.
The reduced price over the high represents the perceived risk that it won't return.
Musk values the stock higher than the mean investor.
I think we have to tolerate a certain amount of irrationality from shareholders.
If you bought a $100k home which then dipped to $80k during Covid, would you accept an unsolicited bid of $90k?
It's reasonable for some people to take the bid, since you could arguably buy another comparable house for $80k and pocket the $10k difference, but I think a lot of other people would reasonably choose not to.
(I'm not totally sure if this logic scales to board rooms / billions of dollars, but curious to hear thoughts.)
I don't think the logical disconnect here is about whether it scales to billions of dollars. The problem is that people live in their homes and there are many frictional costs associated with moving. You need to pick something much more fungible.
I own several stocks that have dropped in the last few months. If someone offered me a 20% premium to sell them today, I would do so in a heartbeat. I would even do so if it meant the company would go private and I couldn't buy that stock again.
If Twitter was worth more, it'd be worth more.
With that logic, you should put a huge chunk of your savings into Twitter to benefit from the insight, as it's currently trading at 39% below its 52-week high.