The reasoning is odd, because bots are nothing new. Musk has repeatedly said that eliminating spam bots will be the key to making Twitter more valuable. However, this man is both elusive and tireless. Shortly after the first tweet, he returned to Twitter to tell his followers that he “remains committed to completing the acquisition.”
Musk announces shelving of Twitter deal
For many, this feeling of hesitation is artificial. Musk’s swift reiteration of his takeover commitment meant to some investors that Musk’s move was just to renegotiate the price rather than back out of the deal.
price down
Musk has come back to the negotiating table for good reason. The tech slump has changed the value of nearly every company since April 4, when Musk disclosed his initial stake of more than 9% in Twitter.As of Friday, the Nasdaq has fallen about 22% since then, while Twitter is down just 10%.However, Twitter shares closed at $40.72 on Friday, down 9.7% from the previous session. The market may be right that investors should say goodbye to Musk’s proposed $54.20 per share offer.
He’s clearly trying to keep the price down, as Tesla’s stock has fallen sharply during the stock market sell-off over the past few weeks. Wedbush Securities analyst Dan Ives said in a phone interview. “The market is different now than it was 30 days ago. When Tesla lost $300 billion in market value, the story changed.” Currently, Musk is using his Tesla stock to raise some of the cash and pledge the stock to make loan.
“Musk was trying to get a better deal,” said Gary Black, co-founder of the exchange-traded fund Future Fund Active.“As the market becomes increasingly skeptical, Musk offers a questionable reason to renegotiate the deal.”
Twitter stock price trend
“It’s not surprising that this deal has been put on hold,” said David Trainer, CEO of stock market research firm Newconstruction. “The speculative power that has artificially pushed up the stock price over the past few years is waning, which changes Musk’s /Twitter how transactions like this are calculated.”
Man-made or not, the robotics issue could see Musk opting out. His agreement with Twitter stipulated that he could leave after paying a $1 billion breakup fee only if there were undisclosed issues with the company.
Twitter has insisted for years that bots make up less than 5 percent of its users, but if that number were higher, Musk might try to cancel the deal. The question isn’t whether he can afford the deal, he’s the richest man in the world, even as Tesla’s stock plunged 33% after he announced a stake in Twitter.
How is Twitter responding?
Still, Twitter’s board is in a tough spot right now. The board reached an agreement with Musk after realizing there was no “white knight” bid to save the company from Musk’s hostile takeover.Spam, or fake user accounts, is a well-known problem that Twitter has been working on over the past few years.
In any case, Twitter management probably didn’t want the deal to fall through. The company’s stock was trading at just $39.31 a day before Musk revealed his acquisition intentions. If the stock’s subsequent decline is as large as the Nasdaq, shares would now trade around $32, 21% below Friday’s close.
Re-negotiations may be the best way forward. To essentially match the Nasdaq’s decline, a fresh offer could be around $44. That’s 12% higher than Twitter’s stock price before Musk’s offer, and it’s almost certainly a lot higher than Twitter itself could have touched without Musk’s bid.
Shareholders may be disappointed, but they will still profit.The bigger winner will be Musk, who always seems to get what he wants.
