Elon Musk’s Twitter acquisition of circus always brings excitement and spillovers.but if friday chaotic sequence of events With nothing to do, most market-goers won’t be leaving their seats anytime soon.
The Tesla CEO said in a tweet early Friday that he was buying Twitter for $44 billion. “Temporarily put on hold”. The news sent the stock plunging 20% in premarket trading.Two hours later, Musk tweeted again that he was “Still committed to acquisitions.” Cue traders’ laughter and exclamations.
Shares have soared, falling just 8% by early Friday. But it was 24% lower than Musk’s $54.20 per share take-private bid. One can only speculate on Musk’s intentions, including a desire to renegotiate the offer.
He has good reason to do so. Tech stocks have sold off heavily since the April 14 public bid on Twitter. The Nasdaq technology index fell more than 14%. Tesla stock — which Musk plans to use as collateral to fund his Twitter bid — has lost a quarter of its value.
In most measures, such as sale price or forward earnings, the offer price values Twitter at the midpoint of a five-year range, so it’s hardly a bargain.
Abandoning a deal entirely can be costly. Musk said he wanted to corroborate Twitter’s findings that spam and fake accounts accounted for less than 5 percent of its users. That sounds like a posturing before claiming a material adverse change, thereby escaping a $1 billion liquidated damages. Musk dropped proper due diligence, which should have been revealed.
More likely, a renegotiation will follow. Twitter has reported another set of weak earnings since Musk unveiled his bid. Senior management has resigned. If Musk walks away, Twitter’s stock will crash. Short-selling firm Hindenburg Research pegged Twitter’s untraded share price at $31.40. With little negotiating leverage, Twitter’s board may have no choice but to bow to a lower offer.