• November 28, 2022

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Topline

Shares of Twitter plunged on Friday after Elon Musk said he would put his acquisition of the social media company “temporarily on hold,” adding additional confusion to whether a deal will still happen as analysts predict that the Tesla billionaire could be looking for an excuse to back out or renegotiate a lower buying price.

Key Facts

Twitter’s stock fell roughly 10% on Friday after Musk said he would put his planned $44 billion takeover “on hold” until he finds out more about the number of fake and spam accounts on the platform.

Musk’s “bizarre” tweet will send the “Twitter circus show into a Friday the 13th horror show,” wrote Wedbush analyst Dan Ives, with “many questions and no concrete answers as to the path of this deal going forward.”

The markets are reacting as if he is going to back out of the deal, which could well be a possibility, according to Michael Hewson, chief markets analyst at CMC Markets, who added, “this is straight out of the Musk playbook, keeping shareholders on their toes.”

Musk’s decision was “very troubling” for investors—Twitter’s stock fell over 10% on Friday, and amid the wider market selloff this year, Musk could well be using the fake accounts as an excuse to “get out of the deal,” Ives adds.

While Musk might be getting nervous about following through, “separately, this move is likely to drive greater uncertainty and chaos within [Twitter], which could have negative implications on its own business prospects,” notes CFRA analyst Angelo Zino.

Amid the buzz generated by Musk’s offer to buy the company in April, Twitter shares are down just 4% so far in 2022—having surged over 20% last month alone, and are outperforming the rest of the market (the benchmark S&P 500 index has fallen over 15%).

What To Watch For:

The Tesla billionaire may simply be holding out for a better deal, potentially hoping to lower his original offering price of $54.20 per share. Twitter’s board of directors last month accepted his bid, however, which valued the social media company at roughly $44 billion. “If Musk decides to go down the deal path, a clear renegotiation is likely to be on the table,” Ives predicts.

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Surprising Fact:

Twitter short-sellers, who are betting that the stock will fall, are loving the confusion around Musk’s deal to buy the company. “I’m looking on the bright side of life this morning,” Nathan Anderson, founder of short-selling firm Hindenburg Research, which has a position against Twitter, wrote on Friday shortly after Musk’s tweet. On paper, Twitter short-sellers received a $136 million boost—bringing potential monthly returns to around $262 million, according to S3 Partners.

Big Number: $232 Billion

That’s how much Musk is worth, according to Forbes’ calculations, making him the richest person in the world.

Further Reading:

Elon Musk Says Twitter Deal ‘On Hold’ (Forbes)

Stocks Rebound, Taking A Breather From Selloff—But Markets Are Down For The Sixth Week In A Row (Forbes)

S&P 500 Hits New 2022 Low As ‘Staggering’ Market Losses Continue (Forbes)

Meme Stocks Surge Despite Market Selloff: GameStop Trading Halted, AMC Jumps (Forbes)

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