BENGALURU: Investors speculating over whether Elon Musk will complete his US$44 billion (RM191.8 billion) acquisition of Twitter Inc sent the social media company’s shares yesterday 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 US$21 billion cash contribution and could decide against selling some of his Tesla Inc shares to come up with it.
The Tesla CEO 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 US$72 billion deal to take Tesla private, but did not move ahead with an offer.
In addition, Musk would have to pay only a US$1 billion breakup fee – a sliver of his fortune estimated by Forbes to be US$240 billion US 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.
Twitter shares ended trading in New York down 2.1% at US$48.68, a big discount to the US$54.20 deal price, implying a 62% 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% on Tuesday, wiping out US$126 billion in value, amid concerns Musk will have to sell shares in the electric-car maker to pay for the US$21 billion equity cheque 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 cheque. 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 US$5.4 billion of assets under management, said the US$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.
In a separate development, a Delaware judge ruled yesterday that Musk did not unjustly enrich himself when he guided the electric vehicle maker in 2016 to acquire SolarCity Corp, where Musk was chairman and the largest shareholder, .
Tesla shareholders had accused Musk of coercing Tesla’s board into buying SolarCity, a struggling rooftop solar panel maker, to rescue his investment, and had sought up to US$13 billion in damages.
“The preponderance of the evidence reveals that Tesla paid a fair price – SolarCity was, at a minimum, worth what Tesla paid for it, and the acquisition otherwise was highly beneficial to Tesla,” said the opinion by Vice Chancellor Joseph Slights of Delaware’s Court of Chancery.
The ruling can be appealed and a lawyer for the shareholders said he was evaluating potential next steps. – Reuters
