Elon Musk puts Twitter deal on hold: Business savvy or cold feet? | DW News

That's the headline ending with a binary question, but there's probably much more that goes into contexualing what the media produces - and then again social media gets into the mix, for example in this reporting on Forbes from last Friday

Billionaires

Elon Musk’s Early Morning Tweet Sends Twitter Shares Crashing, But He Ends The Day Billions Of Dollars Richer

It was a rocky week for Tesla shares– until Musk’s early Friday tweet. That helped the electric vehicle maker regain some lost ground

 

 

May 13, 2022,05:41pm EDT

"With a single tweet at 5:44 AM Friday, Tesla and SpaceX chief Elon Musk simultaneously placed his $44 billion Twitter takeover on hold and demonstrated the platform’s power to move markets. Twitter shares, which plunged in pre-market trading early Friday, ended the day down 9.7%, while shares of Musk’s electric vehicle maker rallied 5.7% Friday to close an otherwise challenging week down 11.1%. The fortune of the world’s richest person–worth an estimated $232.5 billion–rose by $9.5 billion Friday. His losses for the week were cut to $23.4 billion.

The divergent fortunes of Twitter and Tesla shareholders are no surprise to Columbia University law professor John C. Coffee, an expert on corporate governance. “The two stocks are logically inversely related, since what is good for Twitter is bad for Tesla,” he says. “If it looks like Musk may call the [Twitter] deal off, Twitter stock could fall like a stone, as the deal price is all that is supporting it today.”

On the other hand, Tesla shareholders’ concerns about the distraction that the Twitter acquisition poses for their CEO had largely driven the 28.8% drop in Tesla’s stock price from April 13, the day before Musk announced his takeover plans, through Thursday. Covid-related production issues in China have also weighed on the stock, as have government probes into Musk’s late disclosure of his Twitter stake and a judge’s pre-trial ruling in an investor lawsuit that Musk acted recklessly when he tweeted plans to take Tesla private in 2018. According to Wedbush analyst Dan Ives, who covers Tesla, the partial rebound of the electric vehicle maker’s shares Friday reflects investor sentiment that the deal is now less likely to happen, despite a follow-up tweet by Musk two hours later Friday morning that he is “still committed to acquisition.”

“The street is viewing this like a boy that cries wolf with Musk,” says Ives. “It’s now likely that the deal happens lower or he walks and pays $1 billion. . .

Musk’s $44 billion takeover is based on a price of $54.20 per share, though Twitter short-seller Hindenburg Research said in a note released Monday that it sees “a significant risk that the deal gets repriced lower” due to the declining values of tech companies since Musk made his initial offer (the tech heavy Nasdaq is down 13.5% since April 13, even after rallying 3.8% Friday). If Musk were to walk away from the deal, he would have to pay a $1 billion breakup fee.

While Musk cited concerns in his tweet early Friday that Twitter may have understated the 5% of its users that are spam or fake accounts, some have speculated that this may just be a convenient way out of the deal for him.

Columbia University law professor Eric Talley tweeted that Musk’s announcement “has all the trappings of looking for a rip cord to pull.”

Talley’s colleague John Coffee says Musk “could decide that he is paying much too much for Twitter (possibly $10 billion too much) and decide to cut his losses at $1 billion.”

While some have argued that Musk can’t simply pay $1 billion to walk away without certain conditions being met, one of those conditions is likely “third-party financing concerns.” [ ] According to Columbia’s John Coffee, “some of his equity investors could get cold feet, particularly if they have lost a lot on their crypto investments.”

. . As Columbia’s John Coffee puts it, “you may have already noticed that he can change his mind quickly and rarely flies in a straight line for very long.”

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Thu 19 May 2022 Top stories

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Plus, the way in which Musk handled his announcement may not have been all that comforting to Tesla shareholders.

According to Wedbush’s Dan Ives, “The nature of Musk creating so much uncertainty in a tweet (and not a filing) is very troubling to us and the Street and now sends this whole deal into a circus show with many questions and no concrete answers as to the path of this deal going forward.”.