Elon Musk has reached a deal to acquire Twitter for $44 billion but investors were speculating over whether the Tesla boss would complete the buyout process of the social media firm. This has pushed the social media company’s shares to their lowest level since the deal was announced on Monday.
Traders fretted that Musk may not have enough money sitting around to fund his $21 billion cash contribution and could decide against selling some of his Tesla shares to come up with it, Reuters reported.
WILL ELON MUSK BACKTRACK?
He has backtracked before. Earlier in April, he decided at the last minute not to take up a seat on Twitter’s board.
In 2018, Musk tweeted that there was “funding secured” for a $72 billion deal to take Tesla private, but did not move ahead with an offer.
As per the deal with Twitter, Musk would have to pay only a $1 billion breakup fee – a sliver of his fortune estimated by Forbes to be $240 billion – to walk away from the acquisition.
“There’s a lot of headline risk over the next six months that it takes to complete the deal,” Chris Pultz, portfolio manager for merger arbitrage at Kellner Capital was quoted as saying by Reuters.
Roy Behren, managing member of Westchester Capital Management, which has $5.4 billion of assets under management, said the $1 billion deal termination fee was not high enough to make Musk think twice about walking away from the deal.
“In the context of his net worth, and the size of the transaction, the fee is smaller than one would have expected,” Behren said.
TWITTER SHARE PRICE
On Wednesday, Twitter shares ended trading in New York down 2.1 per cent at $48.68, a big discount to the $54.20 deal price, implying a 62 per cent chance of the deal being completed, according to Reuters calculations.
That is a relatively low chance of deal