The Twitter logo and trade information are displayed as a trader works on the floor of the New York Stock Exchange (NYSE) in New York City, United States, on May 3, 2022.
Brendan McDermid | Reuters
Twitter it has fallen by about 12% since it hit its year high in late April. By midday on Thursday, the stock was trading at around $ 46, well below the $ 54.20 that Musk agreed to pay on April 27. The difference represents approximately $ 9 billion in market value.
Although the advice of Twitter approved the purchase, it may take months for the deal to close and there is no guarantee it will. Musk is expected to pay a $ 1 billion break-up fee chooses to leave. Tesla’s CEO is worth over $ 220 billion.
“The market has slightly less confidence that the deal will go through due to regulatory challenges,” Evercore ISI analyst Mark Mahaney said in an email, adding that this is his “very quick interpretation.” “of the movement of shares.
Before Musk made his offer to buy Twitter outright, hey failed to disclose a stake of more than 9% in the company within the SEC’s mandatory 10-day window.
The information reported that the Federal Trade Commission is looking into the timing of Musk’s disclosure. Bloomberg later reported the FTC is looking separately at the acquisition itself, although many experts don’t expect the deal to raise antitrust concerns.
The FTC does not disclose the ongoing investigation and an FTC spokesperson declined to comment.
Dan Ives, an analyst at Wedbush Securities, estimates there is a 90% or more chance that the deal with Musk will close, but he sees three things contributing to the pressure on the stock.
For one, Twitter’s stock would only be valued at $ 20 if it remained a corporation. Second, he said regulatory issues are casting a shadow over the deal. Finally, Ives said, Musk’s financing of the deal, in part by leveraging his Tesla stock, presents greater risks and uncertainties.
Musk may be looking to address funding problems. Bloomberg reported Thursday that it was in talks to raise capital and preferred financing to eliminate the need for a $ 6.25 billion margin loan tied to its Tesla stock. CNBC did not confirm the report.
Ives said such a move could give Street “more confidence that Musk won’t go left if the pressure becomes too much on Tesla stock.”
Ives expects more twists and turns forward.
“This is a soap opera,” he said. “It will have many different chapters.”
Internally, Twitter could take steps to strengthen its balance sheet should Musk retire as inflationary pressures punish the broader tech market. The company confirmed Thursday who is discontinuing most of the hiring and said two senior executives – consumer chief Kayvon Beykpour and revenue product manager Bruce Falck – will leave the company.