Doubts have grown in recent days that Musk would be able to pull off his acquisition of Twitter, and that the entrepreneur may consider dropping his bidding price for the micro-blogging site. The whole transaction has been a frenzied and untraditional affair, largely played out on Twitter. Musk went from being “just” a prolific user to revealing a more than 9 per cent stake in the company and then launching an unsolicited takeover offer — without detailed financing plans — within a matter of weeks. It all came together at breakneck speed in part because Musk waived the chance to look at Twitter’s finances beyond what was publicly available.
“There will also be questions raised over whether fake accounts are the real reason behind this delaying tactic,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, “given that promoting free speech rather than focusing on wealth creation appeared to be his primary motivation for the takeover. The $US44 billion price tag is huge, and it may be a strategy to row back on the amount he is prepared to pay to acquire the platform.”
Twitter shares dropped by 10 per cent on the developments.Credit:AP
The proposed takeover includes a $US1 billion breakup fee for each party, which Musk will have to pay if he ends the deal or fails to deliver the acquisition funding as promised. It is unclear whether an update by Twitter on the number of fake accounts — if materially larger than 5 per cent — would trigger a so-called material adverse effect clause, releasing Musk from the breakup fee.
“Musk should have slowed down for a second and not been so rash,” said Andrew Freedman, partner at the law firm Olshan Frome and Wolosky. “He should have done what every other acquirer buying a company the size of Twitter would do and that is to do due diligence. But Musk is Musk and he’s going to do whatever he wants to do.”
The spread on the deal, which offers an indication of how much Wall Street believes the takeover will be completed, swelled further on Thursday to $US9.11 from $US8.11 in the previous session. That was the widest level since the billionaire launched his bid last month to purchase the Twitter for $US54.20 — and double where it was last week when he announced a roughly $US7.1 billion financing commitment.
Musk’s latest tweets landed just hours after news that Twitter was freezing hiring as part of pre-deal cost-cutting efforts. Two of Twitter’s top leaders are also departing. Kayvon Beykpour, head of consumer product, and Bruce Falck, in charge of revenue product, were both asked to leave the company by Agrawal, the two executives said in separate public posts.
The changes reflect Twitter’s current state of limbo while it awaits a new owner. Hindenburg Research LLC, an investment research firm that focuses on activist short-selling, said on Monday that it sees a “significant risk” that Musk’s proposed offer gets repriced lower.
“The Twitter board have been held hostage and only have themselves to blame for this mess. No other buyer will emerge – if Musk decides he is still interested he can name his price and it won’t be higher.”
Neil Campling, head of TMT research at Mirabaud Equity Research
The analysts cited the ongoing meltdown in technology shares, Twitter’s own weak first-quarter results, including restating several years of user numbers, and the prospect that Musk will sell his 9 per cent stake if the deal doesn’t come together.
Employees at Twitter have been on an emotional roller coaster for weeks. One employee said on Friday he felt like he worked at a circus and that for the first time he was considering changing jobs.
Aside from doubts over the extent of spam bots on Twitter’s platform, the world’s richest person is still working to secure the money to actually complete the deal. Musk has been in talks with investors to raise enough equity and preferred financing to eliminate the need for any margin loan linked to his Tesla shares, according to people with knowledge of the matter.
He recently disclosed $US7.1 billion in equity commitments from investors including Larry Ellison, Sequoia Capital, Qatar Holding and Saudi Prince Alwaleed bin Talal, with the latter rolling his Twitter stock into the deal.
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“Musk has never had the full funding – we know that from his constant attempts to get financial support – but he also held all the cards,” said Neil Campling, head of TMT research at Mirabaud Equity Research. “The Twitter board have been held hostage and only have themselves to blame for this mess. No other buyer will emerge – if Musk decides he is still interested he can name his price and it won’t be higher.”
