Investors fret over potential Musk U-turn in $44B Twitter deal
Traders worry billionaire Elon Musk may not have enough money sitting around to fund his $21 billion cash contribution and could decide against selling some of his Tesla Inc shares to come up with it.
(Reuters)
Investors speculating over whether Elon
Musk will complete his $44 billion acquisition of Twitter Inc have sent the social media company’s shares to
their lowest level since the deal was announced two days ago.
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 Inc shares to
come up with it.
He has backtracked before.
Earlier this month, 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.
In addition, 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,” said Chris Pultz, portfolio
manager for merger arbitrage at Kellner Capital.
Representatives of Musk did not immediately respond to
requests for comment.
READ MORE: Twitter users react to Elon Musk’s free speech argument
Low chance of deal completion
Twitter shares ended trading in New York down 2.1 percent at
$48.68, a big discount to the $54.20 deal price, implying a 62 percent chance of the deal being completed, according to Reuters calculations.
That is a relatively low chance of deal completion, investors said, given it is unlikely that Musk, who has no other media holdings, would face antitrust scrutiny.
Tesla shares fell more than 12 percent on Tuesday, wiping out $126 billion in value, amid concerns Musk will have to sell shares in the electric car maker to pay for the $21 billion equity check in the Twitter deal.
Musk could calm some of the market jitters by providing more
details on the source of his equity financing or bring in
partners to help split the check.
This, however, could introduce
new risks to the deal based on the identity of these partners,
some fund managers said.
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.
READ MORE:
Concerns grow over Musk’s ‘control’ of online speech after Twitter buyout
Source: Reuters
Traders worry billionaire Elon Musk may not have enough money sitting around to fund his $21 billion cash contribution and could decide against selling some of his Tesla Inc shares to come up with it.
(Reuters)
Investors speculating over whether Elon
Musk will complete his $44 billion acquisition of Twitter Inc have sent the social media company’s shares to
their lowest level since the deal was announced two days ago.
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 Inc shares to
come up with it.
He has backtracked before.
Earlier this month, 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.
In addition, 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,” said Chris Pultz, portfolio
manager for merger arbitrage at Kellner Capital.
Representatives of Musk did not immediately respond to
requests for comment.
READ MORE: Twitter users react to Elon Musk’s free speech argument
Low chance of deal completion
Twitter shares ended trading in New York down 2.1 percent at
$48.68, a big discount to the $54.20 deal price, implying a 62 percent chance of the deal being completed, according to Reuters calculations.
That is a relatively low chance of deal completion, investors said, given it is unlikely that Musk, who has no other media holdings, would face antitrust scrutiny.
Tesla shares fell more than 12 percent on Tuesday, wiping out $126 billion in value, amid concerns Musk will have to sell shares in the electric car maker to pay for the $21 billion equity check in the Twitter deal.
Musk could calm some of the market jitters by providing more
details on the source of his equity financing or bring in
partners to help split the check.
This, however, could introduce
new risks to the deal based on the identity of these partners,
some fund managers said.
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.
READ MORE:
Concerns grow over Musk’s ‘control’ of online speech after Twitter buyout
Source: Reuters
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