Tesla CEO Elon Musk is currently seeking to acquire twitter, but Twitter's share price is falling because investors are worried that the deal will not be completed. Twitter's share price has fallen nearly 13% since reaching a year high in late April. As of Thursday's close, Twitter's share price was $45.08, well below Musk's offer price of $54.20 per share on April 27. The difference is equivalent to a market value of more than $9 billion.
Although Twitter's board of directors approved the acquisition, the deal may still take months to complete and there is no guarantee of success. If musk chooses to abandon the acquisition, it will need to pay a $1 billion transaction suspension fee. Musk is currently worth more than $220 billion.
"Due to regulatory challenges, the market's confidence in the successful completion of this transaction has decreased slightly," said mark Mahaney, an analyst at evercore ISI He said this was his "quick interpretation" of the trend of Twitter's stock price.
In addition, musk made no mandatory acquisition of his stake in twitter within 10 days according to the sec. Some media reported that the Federal Trade Commission (FTC) is investigating the time when musk disclosed this information. It is also reported that FTC is still conducting another investigation into the transaction itself, although many experts do not expect the transaction to raise antitrust concerns.
The FTC did not disclose the ongoing investigation, and a FTC spokesman has not yet responded.
Wedbush securities analyst Dan Ives estimates that musk is more than 90% likely to complete the deal, but he believes there are three factors that will put pressure on Twitter's share price. First, if Twitter is still a listed company, the share price may only be more than $20. Second, regulatory issues cast a shadow over the successful completion of the deal. Finally, musk funded the acquisition in part from his Tesla shares, which brought greater risk and uncertainty.
Musk may be trying to address financial concerns. On Thursday, it was reported that he was negotiating equity financing, so he no longer needed to use his Tesla shares for a $6.25 billion margin loan. Ives said the move "may bring more confidence to Wall Street that musk will not give up because Tesla's share price is under too much pressure".
However, he also expects that there may be more twists and turns in the future. "It's a series and there will be many chapters," he said
Twitter may also be taking measures to strengthen its balance sheet to prevent Musk's sudden withdrawal from trading and the greater impact of inflationary pressure on technology companies. The company confirmed on Thursday that it had suspended most of its recruitment and that two executives, including kayvon beykpour, head of consumer business, and Bruce Falck, head of revenue products, would leave the company.