investors restless
Elon Musk temporarily suspended deal to buy Twitter
Elon Musk has been causing chaos on Twitter for weeks.
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Is Elon Musk already looking for a way out of the expensive Twitter purchase? The deal is on hold, he wants to see user base data first, the billionaire wrote. It was initially unclear whether the Tesla boss could easily get out of the agreement.
Tech billionaire Elon Musk put his deal to buy Twitter on hold on Friday. Musk wrote on Twitter that he first wanted to wait for calculations to show that accounts without real users actually account for less than five percent. The online service published this estimate earlier in the week.
Twitter stock falls sharply
Twitter stock quickly fell nearly a quarter in premarket trading after Musk’s tweet, to trade at around $34.50. The price later recovered somewhat to around $37. That’s a far cry from the $54.20 a share Musk had promised shareholders. The paper went out of business on Thursday at $45.08 – a sign of investor skepticism that Musk is actually going through with the deal.
The fact that there are fake accounts on Twitter shouldn’t have come as a surprise to Musk. Because he had declared as one of his goals for the Twitter purchase that he wanted to ban profiles that are used to send spam messages from the platform. It’s unclear whether Musk could use the accusation that Twitter provided inaccurate information about the number of fake accounts to exit the deal or lower his bid. After all, he had waived the usual pre-agreement review of the Twitter books.
$44 billion in the balance
Twitter and Musk both agreed to a $1 billion fine if either side canceled the deal. But experts didn’t think that meant Musk could just change his mind without explanation and be off the hook with a billion dollars.
+++ Also read: Elon Musk does not buy Twitter alone: These investors support his deal, including a Saudi prince +++
The boss of the electric car manufacturer Tesla had agreed with the Twitter board of directors on a deal worth around 44 billion dollars. But he is still dependent on enough shareholders wanting to sell him their shares. Twitter and Musk previously wanted to complete the acquisition by the end of the year. In the past few months, he has already bought a good nine percent stake in Twitter on the stock exchange.
In the past few days, other problems for the deal have also become apparent. Musk originally wanted to borrow around $12 billion of the purchase price, which would be secured with his Tesla shares. But after Tesla’s share price plummeted from around $1,000 to just $728, the plan became increasingly unfavorable to him. Financial service Bloomberg reported on Thursday that Musk is looking for alternative sources of funding instead of the equity-backed loan.