A Twitter logo and trading information are displayed as a trader works on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., May 3, 2022.
Brendan Mcdermid | Reuters
As Elon Musk Pursuit of ownership of TwitterShares of the social media company are falling, suggesting some investors are concerned that the deal won’t work out.
Twitter has fallen about 12% since hitting a year-to-date high in late April. By mid-day Thursday, the stock was trading at around $46, well below the $54.20 Musk agreed to pay on April 27. The difference represents about 9. billion dollars in market value.
Although the board of Twitter approve the purchase transaction, it can still take months for the transaction to close, and there is no guarantee that it will succeed. Musk will have to pay a $1 billion breakup fee he chose to leave. CEO Tesla is worth more than 220 billion USD.
“There is little confidence in the market that a deal will be done due to regulatory challenges,” said Mark Mahaney, analyst at Evercore ISI, in an email.
Before Musk offered to buy Twitter outright, he undisclosed more than 9% of the company’s shares within the SEC-mandated 10-day period.
Information reported that the Federal Trade Commission is probing the timing of Musk’s disclosure. Bloomberg then reported The FTC is reviewing the acquisition on its own, although many experts do not expect the acquisition to raise antitrust concerns.
The FTC did not disclose the ongoing investigations and an FTC spokesperson declined to comment.
Dan Ives, an analyst at Wedbush Securities, estimates there’s a 90% or more chance the deal with Musk ends, but he sees three things contributing to pressure on the stock.
First, Twitter stock would only be valued at around $20 if it remained a public company. Second, he said legal issues were casting a shadow over the deal. Ultimately, Ives said, Musk’s funding of the deal, in part by leveraging his Tesla stock, brings greater risk and uncertainty.
Musk may be trying to address financial concerns. Bloomberg reported on Thursday that he is in talks to raise equity and preferred financing to eliminate the need for a $6.25 billion margin loan tied to his Tesla stock. CNBC has not confirmed the report.
Ives said such a move could give “Street more confidence that Musk won’t move forward if the pressure is too great on Tesla stock.”
Ives expected many twists and turns ahead.
“This is a soap opera,” he said. “It will have many different chapters.”
Internally, Twitter may be taking steps to bolster its balance sheet in the event Musk gives up as inflationary pressures punish the broader tech market. The company confirmed on Thursday announced that it was halting most hiring and said that two top executives — head of consumer Kayvon Beykpour and head of revenue product Bruce Falck — would leave the company.
