Twitter stock is still below Elon Musk's offer price as investors weigh whether the deal will close. But analysts say he's about to close the gap.

• Twitter is still below Elon Musk's takeover price, offering a merger arbitrage opportunity for investors.
• But Musk recently brought in $7 billion in new investments, narrowing the spread between the stock and his offer price.

Wall Street has more confidence in Elon Musk's takeover bid for Twitter, and that has helped narrow the gap between the stock price and the offer price.

Ever since Twitter accepted his offer on April 24, the stock has remained stubbornly below his per-share bid of $54.20 amid lingering skepticism the buyout will happen. That spread offers a so-called merger arbitrage opportunity for investors who want to bet that the stock will reach the buyout price and deliver a tidy return.

"The people that are playing this right now are likely arbitrage investors," Angelo Zino, senior industry analyst at CFRA Research, told Insider.

None other than Warren Buffett recently made a similar play when the legendary investor disclosed last weekend that he bought more Activision stock while it remained below Microsoft's buyout price.

But the arbitrage opportunity on Twitter stock may close soon. Musk's disclosure Thursday that he secured an additional $7 billion in outside funding gave credence to a bid that has quickly gone from rumor to a $44 billion deal that analysts say is nearly complete.

The fact that some big names are investing also helped boost confidence in the deal. Musk said he recieved commitments from 19 investors, including $1 billion from Oracle co-founder Larry Ellison, $850 million from Sequoia Capital, $500 million from Binance and $400 million from Andreessen Horowitz.

That wasn't always the case. After Musk's initial Twitter bid on April 15, the stock dipped 1.7% despite the offer of an 18% premium. Wall Street doubted he was serious. Stifel even downgraded its rating on Twitter, saying the company was caught in a "full-blown Elon circus."

Looming over that skepticism was Musk's claim in 2018 that he had secured funding to take Tesla private at $420 per share, getting him in the crosshairs of the Securities and Exchange Commission. And Musk made clear since the beginning of his pursuit of Twitter that he was only interested in the company because of his "strong, intuitive sense" to foster free speech on the social media platform.

But his bid is no longer dismissed as a vanity project.

"He is making progress. He is showing that he is taking this very seriously," Gordon Haskett analyst Don Bilson wrote in a note on Thursday after the $7 billion investment was disclosed.

That progress also includes Musk's reported plans to name himself as temporary CEO, with the possibility of bringing back former CEO Jack Dorsey, who owns 2.4% of Twitter.

And Musk could bring in even more new investors. Bilson named Thoma Bravo and Silver Lake as possibilities, noting the latter already owns Twitter stock and convertible notes.

A few more investors could put Musk over the top. Wedbush analyst Dan Ives said Thursday's financing announcement "significantly upped the odds of the Twitter deal being consummated." He said Wall Street is now viewing the deal as "95%" done.

CFRA's Zino sees few regulatory obstacles to the Twitter takeover and predicted the spread between the stock and offer price could shrink below 5% closer to the second half of the year. On Friday, Twitter stock was just below $50, about 8% below the buyout price.

For now, the broader stock market's current slump could make Twitter more attractive as a merger arbitrage play.

"If all of a sudden you get a bottom to the market, maybe some of those investors seek better opportunities," Zino said.