Twitter’s stock has slumped as Tesla Chief Executive Elon Musk pursues a takeover, a sign of investor fears that the deal will ultimately be elusive.
Twitter (TWTR-US) has fallen nearly 13% from this year’s high in late April, and Twitter fell more than 2% on Thursday to close at $45.08 a share, well below the $54.20 a share Musk agreed to pay on April 27. , the price difference between the two means that more than $9 billion in market value has been lost.
Although Twitter’s board has approved the acquisition, it will take months to close the deal, and there’s no guarantee it will close.
If Musk doesn’t buy people, he will have to pay a $1 billion breakup fee, but this is a pair of Tesla (which is worth more than $220 billion).TSLA-US) should be just a drop in the bucket for the CEO.
Evercore ISI analyst Mark Mahaney, interpreting Twitter’s share price movement, said: “The market has slightly less confidence in the realization of this transaction given the regulatory challenges.”
Musk disclosed on April 4 this year that he acquired regarding 9.2% of Twitter on March 14, becoming Twitter’s largest individual shareholder. But according to the US Securities and Exchange Commission (SEC) regulations, investors who buy more than 5% of the company’s shares must submit a form to the SEC within 10 days, but Musk failed to disclose it before March 24.
For this reason, some investors took Musk to court for delaying the notification of alleged improper profit. The SEC is investigating Musk’s delayed briefing, according to people familiar with the matter.
In addition to the SEC, foreign media recently reported that the U.S. Federal Trade Commission (FTC) is also investigating whether Musk violated a regulation that requires companies and individuals to notify antitrust enforcement agencies of certain large transactions. However, many experts do not expect the deal to raise antitrust concerns.
The FTC would not disclose the ongoing investigation, and an FTC spokesman declined to comment.
3 Reasons Twitter’s Shares Are Falling
Dan Ives, an analyst at Wedbush Securities, estimated that Musk has a more than 90% chance of completing the acquisition of Twitter, but he believes that Twitter’s stock price is under pressure due to three things.
For one, if Twitter remains listed, its stock price will only be valued at more than $20. Second, regulatory issues clouded the deal. In the end, Musk financed the acquisition, in part using his Tesla stock, which means greater risk and uncertainty.
Musk may be trying to solve financing problems. Bloomberg reported on Thursday that Musk is in talks to raise enough equity and preferred stock financing to not require a $6.25 billion margin loan secured by Tesla stock, people familiar with the matter said.
Ives believes the move will boost Wall Street’s confidence that Musk won’t just come on stage for a show and then bow down when Tesla’s stock is under too much pressure, but he also expects many twists and turns ahead.
Twitter might also take steps internally to bolster its balance sheet, preventing Musk from walking away as inflationary pressures weigh on the broader tech market. Twitter confirmed on Thursday that it was suspending hiring and that two top executives would also be leaving the company, Kayvon Beykpour, head of consumer products, and Bruce Falck, head of revenue products.
