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Elon Musk Puts Twitter Acquisition on Hold, Termination Could Cost Him Billions
Summary: Elon Musk’s Twitter acquisition takes another unusual twist when he tweeted, “Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users” on Friday. He then followed that tweet up with another one saying, “Still committed to acquisition.” The question now becomes why is Tesla and ...
Elon Musk’s Twitter acquisition takes another unusual twist when he tweeted, “Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users” on Friday.
He then followed that tweet up with another one saying, “Still committed to acquisition.”
The question now becomes why is Tesla and SpaceX CEO putting the Twitter acquisition on hold? Is it really because he wants a more accurate assessment on spam/fake accounts? Could it be a negotiating tactic? Or is Musk really reconsidering his position?
It should be noted that if Musk decided to not go through with the acquisition he will have to pay Twitter a reverse termination fee of $1 billion along with a potentially costly lawsuit from the social media giant. Likewise, if Twitter were to withdraw from the deal, they would have to pay the South African-born Musk the same termination fee.
If Musk feels that his initial bid of $44 billion at $54.20 per share was too much, Twitter could sue him for billions in billions in damages.
“This is probably a negotiation tactic on behalf of Elon,” Toni Sacconaghi, Bernstein senior research analyst, said Friday on CNBC’s “Squawk Box.” “The market has come down a lot. He’s probably using the guise of true active users as a negotiation ploy.”
The market has indeed come down a lot with Twitter currently sitting at $40.96, putting the ticker down 10.67% in the last month at the time of writing. Furthermore, Tesla stocks have dropped $254, good for a 24.91% decrease in that same timeframe.
So either Musk is using this as a negotiating tactic for himself or shareholders that will stay with the company when it goes private, or he is being serious about his reconsideration. Perhaps he feels that Tesla stock has gone down substantially because of the potential acquisition (investors might feel that Tesla cannot perform as well if Musk is also focused on Twitter) and would lose more in Tesla’s plummet than if he just pays the $1 billion to Twitter along with potentially additional funds from a lawsuit.
There is still a lot that remains unknown, but it is clear the deal is a bit further away from finalization than previously expected.
Author: Tyler Irvin
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Link: Elon Musk Puts Twitter Acquisition on Hold, Termination Could Cost Him Billions [Copy]
