Massive Drop In Tesla Stock Fuels Speculation Musk May Back Out Of Buying Twitter

When Twitter agreed to accept Elon Musk's bid to buy the website for a whopping $44 billion earlier this week, it seemed that that was the end of the "will he/won't he" drama surrounding Musk taking over one of his favorite social media platforms. However, while the deal is agreed upon, it isn't finalized yet. It pends approval from regulators and shareholders, and while analysts agree there is no reason for those parties to kill the deal, some wonder if another party may nix Elon Musk's Twitter takeover: Elon Musk himself.

i'm gonna go ahead and predict elon musk will back out of buying twitter

— Shaun (@shaun_vids) April 27, 2022

Speculation picked up that Musk may back out of the deal after his company Tesla suffered a 12.2% sink in stock market value, wiping out $125 billion in its market value.

Musk agreed to fund his purchase of Twitter with $21 billion of his own money and shore up the rest of the funding from banks. Two-thirds of Musk's net worth comes from his stock in Tesla, and it is thought he will sell some of his Tesla assets to fund his purchase of Twitter. If Tesla stocks remain low, Musk would be forced to sell more of his stocks, which would in turn drive down stock prices further.

In response to Tesla's market activity, Twitter stocks fell as well. Musk purchased Twitter at $54 a share, but its share price dropped to $48 dollars, which analysts have interpreted as investors worrying the deal won't go through. This, in turn, started to drive Tesla stock prices back up, a sign that those paying attention to the deal are pessimistic about it actually happening.

Others have noted that Musk may have a conflict with China. Half of Tesla vehicles are produced in China and the company gets a quarter of its revenue there. Musk has publically envisioned his version of Twitter as a beacon of "free speech," but China is not a fan of Twitter, especially after Twitter defied the country during the Hong Kong protests. There is potential that China could hold Tesla hostage if a Musk-owned Twitter refuses to censor its anti-China content.

Musk is also notoriously flaky when it comes to his grand ambitions. Four years ago, he vowed to set up a candy company to take on Warren Buffet's See's Candies, which never came to fruition after he decided he couldn't find a better candy.

Lastly, if Musk wants to back out of the deal, he would have to fork out $1 billion as a termination fee, which analysts have described as a significantly lower penalty than is typical in such major buyouts. $1 billion is less than 1% of his net worth of $257 billion and obviously significantly lower than the $21 billion he promised to pay for Twitter.

The financial and political conflicts of the Twitter buyout paired with a notoriously fickle billionaire who could easily back out of the deal if he so chooses has social media skeptical Musk's blockbuster takeover will actually happen.

A few of the reasons why Elon Musk can be expected to scrap plans to acquire Twitter: he has never done anything he said he was going to, and why would he start now

— BooDoo (@BooDooPerson) April 27, 2022

Holy shit. https://t.co/hxghOK2YRK pic.twitter.com/i8d20zxVer

— St. Dan (@StolenDans) April 27, 2022

If you are thinking about leaving Twitter, I would hold off for a bit. Musk vastly overpaid, and almost half of his bid is financed through leveraging his Tesla stock. Doing my research, I think the bid is on shaky grounds. Let’s watch how it plays out.

— Amy Siskind 🏳️‍🌈 (@Amy_Siskind) April 27, 2022

Twitter’s stock is trading at $48.70, a 10.1% discount to Musk’s offer. As someone who used to participate in trading stocks of pending acquistions, I can tell you that this is a HUGE discount and means smart people are VERY skeptical the deal will close, which I am happy to see.

— Spiro Agnew’s Ghost (@SpiroAgnewGhost) April 27, 2022

We have 3-6 months to see if Musk actually ends the year with Twitter in his possession. In the meantime, he seems unbothered by the skepticism surrounding the completion of his takeover.

Let’s make Twitter maximum fun!

— Elon Musk (@elonmusk) April 28, 2022