Elon Musk spooked the market with his early Friday tweet that the Twitter, Inc. TWTR deal is on hold. Wedbush analyst Dan Ives says there are three scenarios at play now:
- The Street will view the announcement as signaling that the deal could be falling apart.
- Alternatively, the development could suggest Musk is looking around to negotiate a lower bid price.
- It could also mean the Tesla TSLA CEO is “simply walking away from the deal” with a $1 billion breakup fee.
He could be using Twitter’s filing of spam accounts as a way to get out of the deal in a “vastly changing” market.
“The initial reaction will be positive for Tesla shares as now the Street will view the chances of a deal as less than 50%,” Ives wrote in a note.
If Musk persists with his pursuit of Twitter, there could be a clear “renegotiation” on topics such as financing path, leverage of Tesla stock, prior financing partners, employee reaction, etc.
“The nature of Musk creating so much uncertainty in a tweet (and not a filing) is very troubling to us and the Street and now sends this whole deal into a circus show with many questions and no concrete answers as to the path of this deal going forward,” the analyst said.
TWTR Price Action: Twitter shares were down 13.82% to $38.85 in premarket trading on Friday, according to Benzinga Pro data. Meanwhile, Tesla was advancing 6.11% to $772.45.
Photo: Courtesy of OnInnovation on Flickr