Twitter Stock Plunges As Elon Musk Says $44 Billion Takeover 'On Hold', But Still 'Committed'
Updated at 9:33 am EST
Twitter (TWTR Get Twitter, Inc. Report shares plunged lower in pre-market trading after Tesla (TSLA Get Tesla Inc Report CEO Elon Musk said his $44 billion takeover of the social media group was "temporarily on hold".
Shares pared some of their declines, however, after Musk said he was 'still committed to acquisition."
Musk made both declarations through his verified Twitter account early on Friday in response to a Reuters story from May 2. The story, based on a Twitter 10-Q filing with the Securities and Exchange Commission, stated that Twitter had 229 million users who viewed consistent ads, adding that fewer than 5% of its so-called 'monetizable daily active users' were false or spam accounts.
"Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users," Musk said.
Twitter shares 9.5% lower in early Friday trading to change hands at $40.81 each. Tesla shares, meanwhile, surged 4.77% to $762.75 each.
Others have suggested that the $400 billion decline in Tesla shares since Musk unveiled his plans to purchase Twitter in early April has caused the world's richest man to reconsider, given his reliance on their value to fund the $44 billion deal.
Securities and Exchange Commission filings published late last month indicated that Musk sold 4.4 million Tesla shares between over the two-day period ending on April 27, just days after inking an agreement to provide around $21 billion in financing for his $54.20 per share offer for Twitter. another SEC filing was made public early Friday, showing Musk had offloaded between $4.5 and $5 billion in shares on April 28.
Earlier this week, analysts at Hindenburg Research, a noted short-seller, cautioned that the deal could be 'repriced' if Musk threatens to walk away.
Hindenburg said Musk could pay the $1 billion break-up fee tied to the takeover and still come away with a better deal if he were to re-negotiate, noting his "significant leverage" over the micro-blogging website and the lack of a competing offer.
"Musk holds all the cards here," Hindenburg said. "If Elon Musk's bid for Twitter disappeared tomorrow, Twitter's equity would fall by 50% from current levels. Consequently, we see a significant risk that the deal gets repriced lower."
Musk has been looking to alter the financing of his 'take private' deal on a number of occasions, bringing in new equity investors and reportedly soliciting others to reduce the exposure of the $62.5 billion worth of Tesla shares he's pledged against margin loans.
Last week, Musk said he's received equity commitment letters from various investors, including Sequoia Capital, that totaled $7.14 billion, to aid his $44 billion Twitter takeover, a move that ostensibly both reduced the cost Musk would provide from his personal fortune -- much of it linked to the value of Tesla shares -- to complete the transaction while boosting the overall equity portion of the proposed takeover to $27.45 billion.
The filing also noted that Prince Alwaleed Bin Talal of Saudi Arabia, a significant Twitter shareholder who had previously dismissed Musk's $54.20 per share bid for the group as "not even close" to its fundamental value, will contribute 34.95 million of his shares and retain an equity commitment in the group after its privatized.