Musk sends Twitter shares tumbling
Doubts have grown in recent days that Musk would be able to pull off his acquisition of Twitter, and that the entrepreneur may consider dropping his bidding price for the microblogging site.
“There will also be questions raised over whether fake accounts are the real reason behind this delaying tactic,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, “given that promoting free speech rather than focusing on wealth creation appeared to be his primary motivation for the takeover. The $44bn price tag is huge, and it may be a strategy to row back on the amount he is prepared to pay to acquire the platform.”
The proposed takeover includes a $1bn breakup fee for each party, which Musk will have to pay if he ends the deal or fails to deliver the acquisition funding as promised.
It is unclear whether an update by Twitter on the number of fake accounts — if materially larger than 5% — would trigger a so-called material adverse effect clause, releasing Musk from the breakup fee.
Musk’s latest tweets landed just hours after news that Twitter was freezing hiring as part of pre-deal costcutting efforts. Two of Twitter’s top leaders are also departing. Kayvon Beykpour, head of consumer product, and Bruce Falck, in charge of revenue product, were both asked to leave the company by CEO Parag Agrawal, the two executives said in separate public posts.
The changes reflect Twitter’s current state of limbo while it awaits a new owner. Hindenburg Research, an investment research firm that focuses on activist short-selling, said on Monday it sees a “significant risk” that Musk’s proposed offer gets repriced lower. The analysts cited the ongoing meltdown in technology shares, Twitter’s own weak first-quarter results, including restating several years of user numbers, and the prospect that Musk will sell his 9% stake if the deal doesn’t come together.
Aside from doubts over the extent of spam bots on Twitter’s platform, the world’s richest person is still working to secure the money to complete the deal.
Musk has been in talks with investors to raise enough equity and preferred financing to eliminate the need for any margin loan linked to his Tesla shares, according to people with knowledge of the matter.
He recently disclosed $7.1bn in equity commitments from investors including Larry Ellison, Sequoia Capital, Qatar Holding and Saudi Prince Alwaleed bin Talal, with the latter rolling his Twitter stock into the deal.
“Musk has never had the full funding — we know that from his constant attempts to get financial support — but he also held all the cards,” said Neil Campling, head of TMT research at Mirabaud Equity Research. “The Twitter board have been held hostage and only have themselves to blame for this mess. No other buyer will emerge — if Musk decides he is still interested he can name his price and it won’t be higher.”