Twitter shares have dropped to their lowest level since Elon Musk agreed to buy the social media business for $44 billion on April 25, prompting worries about whether Musk will try to renegotiate the agreement.
When Twitter shares dipped below $46.75 on Tuesday, the estimated probability of the deal closing at the agreed price fell below 50% for the first time. That’s halfway between the transaction price and the stock price before Musk announced his ownership in the social media company on April 4.
The stock ended the day at $47.26, valuing the corporation at $36 billion.
While the news that Musk may waive a Twitter ban for former President Donald Trump is noteworthy,
Investors were concerned about inflation and a likely economic downturn, so Twitter stock fell along with the rest of the technology sector. Short seller Hindenburg Research, for example, speculated on whether Musk would try to negotiate a lower transaction price before completion.
Musk has made no indication that he intends to resume talks, and his officials have declined to comment on the matter.
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Why would Musk seek to modify the terms of the agreement?
According to Forbes, Musk is worth about $240 billion, but the majority of his fortune is invested in Tesla, the electric car company he heads.
Musk has already taken steps to gather funds for the purchase of Twitter. He sold $8.5 billion in Tesla stock and borrowed $12.5 billion against his Tesla equity as collateral. After bringing in co-investors, he cut the margin loan to $6.25 billion last week. In a regulatory filing, Musk stated that he may seek additional money for the deal.
While Musk has stated that the economics of buying Twitter are unimportant to him, some investors believe that the 27 percent decrease in Tesla shares since Musk revealed his investment is due in part to fears that he may have to sell more shares. As a result, if Musk can negotiate a cheaper acquisition price, Tesla’s shares will be under less pressure. Some co-investors might encourage him.
