Elon Musk-Twitter Deal: All that can still go wrong for the Tesla billionaire
Elon Musk has outlined his plan to finance the deal by taking loans from banks and funding about USD 21 billion with his own equity
San Francisco: Tesla CEO Elon Musk’s USD 44 billion deal to buy social media giant Twitter is moving forward at a great pace, however, before it is finalised, there are still chances that the deal may fall apart.
Earlier, Elon Musk said that for the microblogging site to deserve public trust, it must be politically neutral. “For Twitter to deserve public trust, it must be politically neutral, which effectively means upsetting the far right and the far left equally,” he tweeted. Also, he stated that he want to buy Twitter to promote free speech.
While, Musk has outlined his plan to finance the deal by taking loans from banks and funding about USD 21 billion with his own equity, The Washington Post reported that still there are risk factors the deal faces.
As per the report, Twitter’s stock price on Wednesday fell to close at USD 48.64, which is below the purchase price of USD 54.20 per share that Elon Musk is set to pay for the company. This indicates that some investors were spooked the deal could fall through, as per analysts.
While Musk plans to fund about USD 21 billion of the deal with his own equity, part of that will come from his significant stake in Tesla. However, the company’s stock dropped off steeply in price the day after the billionaire’s deal to acquire Twitter was announced. The drop carved USD 100 billion from the stock, in turn leading to a hit to Musk’s fortune and it could jeopardize the financing for the deal if it drops too low, according to The Washington Post.
It further stated that another reason could be Musk’s tweets.
The Tesla CEO, who has more than 88 million followers on Twitter, is known for sharing somewhat controversial or market-moving items that have got him into trouble with the Securities and Exchange Commission.
As per the report, the terms of his deal allow him to tweet about his acquisition “so long as such tweets do not disparage the Company or any of its Representatives.”
It further stated that a person familiar with the dealmaking process said the clause only applies when Musk is tweeting or commenting about the deal itself, and therefore negative comments about Twitter outside of that do not violate the terms.
A relatively low split fee might be another reason. The terms of the deal reportedly include a USD 1 billion termination fee, which either Elon Musk or Twitter would have to pay each other if they pull out of the deal for specific reasons. The fee is not large enough to prevent either party from walking away, if analysts are to be believed.
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