Elon Musk says that the Twitter agreement is temporarily on hold

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SAN FRANCISCO – Elon Musk tweeted early Friday that his $ 44 billion bid to buy Twitter was temporarily pending when he investigated the number of spam accounts on the site, and sent the company’s shares down sharply.

“Twitter agreement temporarily pending pending details that support calculations that spam / accounts actually represent less than 5% of users,” he tweeted, linking to a Reuters article from last week quoting a Twitter file.

About two hours later, he added: “Still committed to acquisitions.”

It was not immediately clear how the Tesla boss would put the deal on hold or how serious the threat was. Musk has been subjected to rude statements on Twitter, which has been investigated by the Securities and Exchange Commission. The terms of the agreement require a resolution fee of $ 1 billion.

Musk and Twitter did not immediately respond to requests for comment.

At the Financial Times Future of the Car summit on May 10, Tesla’s CEO said permanently banning then-President Donald Trump from Twitter was “flat-out stupid.” (Video: Financial Times)

Elon Musk says he wanted to reverse the Twitter ban on Donald Trump

Prior to the tweet, Musk was already looking for more investors for the purchase, as a market downturn puts pressure on his financing.

Tesla has lost $ 400 billion in market value since Musk’s interest in Twitter went public in early April, driving a wedge in his acquisition plans at a time when he has committed $ 21 billion of his fortune to fund the purchase. Musk had planned to buy Twitter with a combination of loans and equity obligations, and utilized much of his ownership interest in the world’s most valuable car manufacturer in the agreement – from which he derives most of his wealth.

Musk’s net worth, which makes him the world’s richest man, has fallen by about $ 50 billion in recent weeks, according to Forbes’ real-time wealth index. And the Tesla stock has lost almost 30 percent of its value in the last month alone.

Musk revealed more than $ 7 billion in funding last week from sources including investment companies, Oracle founder Larry Ellison, the Binance cryptocurrency exchange, Qatar’s sovereign wealth fund and Saudi Prince Alwaleed bin Talal.

Musk gets help from technological titans and a Saudi prince in Twitter messages

Musk has now sought further investment beyond what he had originally planned, due to the economic downturn and the weakening of Tesla’s share price, according to people familiar with the negotiations, who spoke on condition of anonymity, citing the sensitivity of the discussions. .

Partly due to the downturn, Musk and the bankers involved in the deal have been under pressure to strengthen partners. Among them: Yahoo owner Apollo Global Management, which is expected to extend more than $ 1 billion in funding with a group of partners, according to one person.

And CNBC reported on Thursday that startup investor Jason Calacanis lined up investors to participate in Musk’s ownership bid. Potential investors who spoke to The Washington Post said that interest in Musk’s bid is still high due to the belief that he would make a good return on his investment, despite his statement that Twitter’s finances are not his concern.

Twitter shares fell about 20 percent in pre-market trading after the tweet, but reduced losses; they were down 9.5 percent shortly after opening. The Tesla stock opened 6.2 percent higher before closing. Investors in the electric car company, led by Musk, have been concerned about the billionaire’s use of his stake to finance the Twitter deal.

It would not be the first time Musk has tweeted anything that moves the markets; sometimes the exercise gets him in trouble. Most famous was that he tweeted in 2018 that he had secured financing to take Tesla privately to $ 420 per share. The SEC fined him $ 20 million. He has also tweeted that Tesla is overrated, and tweeted a poll that asked the public if he should sell part of his Tesla share.

Five reasons why the Twitter agreement may still fall apart

There were no new SEC documents regarding the agreement Friday morning, the normal course of action for major changes, analysts said.

“Doing this in a tweet and not in an archive is unscrupulous, and it sends the market into a circus show,” said Wedbush Securities analyst Dan Ives.

The problem with Twitter robots is not new to Musk either. He has cited getting rid of spam bots on social media, or automated accounts that often market products or schemes, as one of his main focuses for improving Twitter.

“If our Twitter bid succeeds, we will defeat the spammers or die trying!” he tweeted last month. In a broadcast interview this week, he reiterated that the company must crack down on robots and build trust with users.

Some experts said that it may be a tactic to renegotiate the price of the agreement.

“I can only say that when it comes to mergers, it’s a pretty slim reed to cancel a deal,” said Ann Lipton, an associate professor of law at Tulane University. “Sometimes this kind of thing is used as a basis for renegotiating a contract price, but again, unless the issue has a far greater impact on Twitter financially than what has been reported, there is not a strong reason for it either.”

Lipton said issues including user accounts would usually be checked out before the parties agreed on a deal.

Here’s what Musk has said about buying Twitter

The terms of Musk’s deal to buy Twitter allow him to tweet about his acquisition “as long as such tweets do not downgrade the company or any of its representatives.”

The deal has already weakened Twitter internally since it was announced last month. CEO Parag Agrawal announced the resignation of two top executives this week, and many employees have expressed concern about what Musk’s ownership could mean for the company.

Some employees are particularly wary of Musk’s calls to promote “freedom of expression” on the site, an attitude they worry about could lead to a reversal of the company’s security policy put in place to protect online users.

In recent days, Musk has warned that he is not yet the owner of Twitter, even though he has made clear plans for the social media service – such as restoring the account of former President Donald Trump, who was banned after January 6, 2021, attacking it the American capital.

“If the Twitter acquisition is completed, the company will be super-focused on hardcore software development, design, [information security] and server hardware, “he said wrote in a tweet last week, adding: “Work ethic expectations would also be extreme, but much lower than I demand of myself.”

He told a Financial Times summit on Tuesday that the ban on Trump “was a morally bad decision, to be clear, and extremely foolish.”

The agreement may also be affected by external factors, such as regulatory scrutiny by the Federal Trade Commission or the SEC. The Wall Street Journal reported on Wednesday that the SEC was investigating Musk for late reporting that he had bought a 5 percent stake in Twitter.

The Washington Post previously reported that it may have earned him $ 156 million.

Musk has used much of the Tesla stock as collateral for his loans, making the recent economic downturn a particular problem for his bid. Tesla has warned of the risk it faces due to the amount of Tesla stock Musk has committed as security. Tesla’s stock traded below $ 730 on Thursday, well below $ 1100 from the beginning of April. A fall of several hundred dollars could trigger claims that will force Musk to sell some shares, analysts said.

At one point last year, he had committed to more than half of his shares as collateral, according to financial records. Because the Twitter bid would only increase exposure, Musk has faced pressure to reduce its equity commitment, according to people with knowledge of the case who spoke on condition of anonymity to discuss sensitive issues.

Elon Musk is worth $ 270 billion. He wanted to buy Twitter with an IOU.

In its annual filing, Tesla was open about the potential risk.

“If Elon Musk were forced to sell shares of our common stock that he has promised to secure certain personal loan obligations, such sale could cause our share price to fall,” according to the document.

“We are not a party to these loans,” the company wrote. If the stock price falls, Tesla wrote, Musk could be forced by banks to sell Tesla shares to meet its borrowing obligations.

This could push the stock further.

“It’s going to be a spiral,” Ives said.

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