Wednesday, June 29, 2022

Elon Musk suspends buying Twitter, shares plummet

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Elon Musk has put his deal to buy Twitter on hold. The Tesla boss wrote on Twitter Friday that he wanted to wait until calculations showed that accounts with no real users behind them actually made up less than five percent. The SMS service published this estimate earlier this week.

Twitter shares quickly fell nearly a quarter in premarket trading after Musk’s tweet, trading at about $34.50. That’s a long way from the $54.20 per share Musk had promised to shareholders. The paper went bankrupt on Thursday for $45.08 — a sign of investor skepticism that Musk is actually going through with the deal.

Tesla CEO Elon Musk had agreed a deal with Twitter’s board of directors worth about $44 billion. However, he is still dependent on enough shareholders to sell him their shares. Earlier, Twitter and Musk wanted to complete the acquisition before the end of the year. In recent months, he has already bought a good 9 percent share in Twitter on the stock exchange.

The fact that there are fake accounts on Twitter shouldn’t come as a surprise to Musk. He had made it one of his goals for the purchase to ban profiles used, for example, to send spam messages from the platform. It’s unclear whether Elon Musk can use the accusation that Twitter provided false information about the number of fake accounts to end the deal or lower his offer. He had renounced the usual checking of the Twitter books before the deal.

Twitter and Elon Musk have agreed on a $1 billion fine if either side cancels the deal. But experts didn’t think this meant Musk could just change his mind without explanation and be off the hook with a billion dollars.

In recent days, other issues for the deal have also surfaced. Musk originally wanted to borrow about $12 billion from the purchase price, which would be secured with his Tesla shares. But after Tesla’s stock price plummeted from about $1,000 to just $728, this plan became increasingly unfavorable to him. Financial service Bloomberg reported Thursday that Musk is looking for alternative financing sources in lieu of the stock-backed loan.

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