- Elon Musk said on Friday he would put his $44 billion purchase on Twitter “on hold.”
- Experts say it could be a negotiation tactic to get a better price.
- Some say Musk may be maneuvering to abandon the deal altogether.
Elon Musk’s proposed $44 billion takeover of Twitter took another surprising turn on Friday when the billionaire tweeted that the deal was “temporarily on hold” as he scrutinized the number of fake and spam accounts on the platform.
The moment was intriguing. Musk’s tweet cited a Reuters report on a 10-day-old Twitter archive that did not contain any new information about fake accounts.
In a note to customers on Monday, Wedbush analyst Dan Ives said pressure on Tesla shares, a volatile market, and funding problems suggest Musk was “cold” with the purchase and could be using the issue of fake accounts as a “scapegoat to push for a lower price.”
Toni Sacconaghi, an analyst at Bernstein, told CNBC that Musk suspending the deal was “probably a negotiation tactic” amid a broad sell-off of tech stocks.
Several analysts agree that Musk may be trying to push for a lower price. Some suggest that his fake accounts tweet could be a pretext for abandoning 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,” said Stefano Bonini, corporate governance expert at Stevens Institute of Technology. , to the Financial Times. Two analysts also told the FT that they believed Musk was trying to leverage 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 re-evaluate 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 share price has dropped more than 20% since he went public with his offer.
If he wants to back out of the deal, he’ll need a good excuse.
There’s a clause in Musk’s offer that would allow him to walk away from the purchase if he paid a $1 billion exit fee. However, CNBC reported that the option would only be available to Musk in specific circumstances, for example, if a regulator blocked the deal or had problems with third-party funding.
A mergers and acquisitions lawyer familiar with the matter told CNBC that if Musk tries to back out of the deal just because he thinks he paid too much, Twitter could sue him in the billions.
Wedbush’s Ives said that Musk could cite concerns about fake accounts as a reason to walk away while paying the exit fee, but Twitter would likely challenge that in court.
Daniel Rubin, a mergers and acquisitions attorney at corporate law firm Dechert, told the FT that Musk could still find ways to force Twitter’s hand to let him out of the deal and just pay the $1 billion exit fee. “He can always project the conditions that will leave Twitter with no significant choice but to shut down,” Rubin said.
Ever since Twitter’s board accepted Musk’s $44 billion offer, the Tesla CEO appears to be trying to limit his risk exposure. On May 5, he announced that he had raised an extra $7 billion in third-party support. Bloomberg reported on Thursday that it was trying to restructure funding for the business so that it was less reliant on its Tesla shares.
Musk did not immediately respond when contacted by Insider for comment.