Why has Elon Musk put his $44 billion Twitter deal on hold?

  • Elon Musk said on Friday that he would “suspend” his $44 billion purchase of Twitter.
  • Experts say it could be a negotiation tactic to get a better price.
  • Some say that Musk could be maneuvering to abandon the deal altogether.

Twitter’s proposed $44 billion takeover of Elon Musk took another surprising turn on Friday when the billionaire tweeted that the deal was “temporarily on hold” as he analyzed the number of fake and spammy accounts on the platform.

The moment was unnerving. Musk’s tweet cited a Reuters report on a Twitter presentation that was ten days old at the time and that did not contain any new information about fake accounts.

In a note to clients on Monday, Wedbush analyst Dan Ives said pressure on Tesla shares, a volatile market and deal financing issues suggested Musk had “cooled off” on the purchase and could be using the fake account problem as a “scapegoat to push for a lower price”.

Toni Sacconaghi, an analyst at Bernstein, told CNBC that Musk’s suspension of the deal was “likely a negotiating ploy” amid a sell-off in tech stocks.

Several analysts agree that Musk could be trying to push for a lower price. Some suggest that the fake account tweet of him could be a pretext to abandon the deal altogether.

“Unless Twitter has misreported the data, which would be a serious security fraud, this could be a way to negotiate a lower price or walk away,” Stefano Bonini, a corporate governance expert at Stevens Institute of Technology, told The Associated Press. Financial Times. Two analysts also told the FT that they believed Musk was trying to get a better price.

Before Musk tweeted that he was suspending the deal, research by short-seller Hindenburg speculated that he was in a strong position to change the price of the deal.

Musk could insist on a follow-up tweet on Friday that he was “still committed” to the Twitter deal. But his current offer is based in part on a $12.5 billion loan against his Tesla shares, and Tesla’s stock price has plunged more than 20% since he made his offer public.

If you want to walk out of the deal, you’ll need a good excuse.

There is a clause in Musk’s offer that would allow him to abandon the purchase if he pays a $1 billion exit fee. However, CNBC reported that the option would only be available to Musk in specific circumstances, such as if a regulator blocked the deal or he ran into trouble with third-party financing.

An M&A attorney familiar with the matter told CNBC that if Musk tries to walk away from the deal just because he feels he overpaid, Twitter could sue him for billions.

Wedbush’s Ives said Musk could cite concerns about fake accounts as a reason for leaving while paying the exit fee, but Twitter would likely challenge this in court.

Daniel Rubin, an M&A attorney at corporate law firm Dechert, told the FT that Musk could still find ways to force Twitter to leave him out of the deal and pay only the $1bn exit fee. “He can always design the conditions that will leave Twitter with no meaningful choice but to terminate,” Rubin said.

Ever since Twitter’s board accepted Musk’s $44 billion offer, the Tesla CEO appears to have been trying to limit his risk exposure. On May 5, he announced that he had secured an additional $7 billion in third party backing. Bloomberg reported on Thursday that he was trying to restructure the financing of the deal to make it less reliant on his Tesla shares.

Musk did not immediately respond when contacted by Insider for comment.

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