September 29, 2022

Tesla’s stock slide raises doubts about Elon Musk’s Twitter purchase

3 min read

Twitter stock is hovering around. 47.50. This is slightly above the midpoint of Musk’s takeover offer price and between $ 39.31 and 46.76 – the price at which Twitter shares were trading when Musk first revealed that he had More than 9% participated In the company at the beginning of last month.
Investors seem skeptical about whether Musk will bargain for the original price, despite the fact that it recently Stands at over 7 7 billion in financing. From an impressive group of investors including mutual fund powerhouse Fidelity, venture capital giant Sequoia and Oracle (ORCL) Co-founder Larry Ellison.
Musk also has one. Commitment From Morgan Stanley (Ms.) $ 12.5 billion in financing with the help of margin loans that use its Tesla stock holdings as collateral.
Elon Musk says he will lift Trump's ban on Twitter.

Given the sharp fall in Tesla shares, will Musk have to lower its offer price to deal if Tesla stock continues its electric slide? Will he be completely away from Twitter? Or can an opportunist come up with a higher cost and some, more secure funding? (That doesn’t seem likely, as by now another bidder may have stepped in to make an offer.)

Wall Street does not believe the deal could be priced at the current offer.

Doubts are growing about the possibility of a deal.

“There is a significant risk that the price of the deal will go down,” research firm Hindenburg said of Twitter’s acquisition. A report earlier this week. Near Hindenburg. Make a name for yourself Due to its downturn reports on electric vehicle startups in the last few years Nikola And Lordstown Motors.

Hindenburg is cutting Twitter stocks, which means the firm will benefit if the shares fall. “We support Musk’s efforts to privatize the company, and believe that he can do it, but there is no reason why he should do so at this level,” Hindenburg noted in its report. . “

Adding more debt to Twitter to help finance the deal will “make it more difficult to achieve the goal of reducing reliance on Musk’s advertising, which is currently a major part of its revenue,” the firm notes. What

And Hindenburg added: “Keeping the future of Twitter (and ultimately Tesla) based on more equity-backed margin loans, or potentially higher sales of Tesla equities amid volatile markets, increases the risk for both entities.” . “

But Musk has repeatedly denied the allegations. he replied (On Twitter, naturallyApparently on Hindenburg’s criticism of Monte Python, he said that Hindenburg “should never forget to look at the bright side of life!”
Opinion: We should not rely on Musk's plans to change Twitter
Musk also said in one TED Conference Last month when he “doesn’t care about economics at all” Twitter discusses the deal.

Still, Twitter’s “economics” are perfectly mixed. The company reported quarterly consumer growth that topped the forecast at the end of last month, but revenue fell short of Wall Street estimates.

Analysts also believe that smiles will not succeed. Wall Street’s consensus target price is just $ 51.88 per share, about 10% higher than current levels but still 4% lower than Musk’s $ 54.20 bid.

In addition, 32 of the 36 analysts who follow Twitter have rated the stock as “hold”. Only two recommend Twitter as a “buy” while the other two stocks have a “sell” rating.

If he really wants to buy Twitter, it would be unwise to bet against the richest man in the world. But analysts – and Twitter investors – are still not convinced that Musk is going to make a deal.

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