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Thursday, June 1, 2023

Elon Musk Suspends Buying Twitter, Stock Plummets

Elon Musk has put his deal to buy Twitter on hold. The Tesla boss wrote on Twitter on Friday that he first wanted to wait for calculations to show that accounts with no real users behind them actually accounted for less than five percent. The short message service published this estimate earlier in the week.

Twitter stock quickly fell nearly a quarter in premarket trading after Musk’s tweet, to trade at around $34.50. That’s a far cry from the $54.20 a share Musk had promised shareholders. The paper went out of business on Thursday at $45.08 – a sign of investor skepticism that Musk is actually going through with the deal.

Tesla CEO Elon Musk had agreed with the Twitter board of directors on a deal worth around 44 billion dollars. However, he is still dependent on enough shareholders wanting to sell him their shares. Twitter and Musk previously wanted to complete the acquisition by the end of the year. In the past few months, he has already bought a good nine percent stake in Twitter on the stock exchange.

The fact that there are fake accounts on Twitter shouldn’t have come as a surprise to Musk. He had declared it one of his goals for the purchase to ban profiles that are used, for example, to send spam messages from the platform. It’s unclear whether Elon Musk could use the accusation that Twitter provided inaccurate information about the number of fake accounts to exit the deal or lower his bid. He had waived the usual check of the Twitter books before the agreement.

Twitter and Elon Musk both agreed to a $1 billion fine if either side canceled the deal. But experts didn’t think that meant Musk could just change his mind without explanation and be off the hook with a billion dollars.

In the past few days, other problems for the deal have also become apparent. Musk originally wanted to borrow around $12 billion of the purchase price, which would be secured with his Tesla shares. But after Tesla’s share price plummeted from around $1,000 to just $728, this plan became increasingly unfavorable to him. Financial service Bloomberg reported on Thursday that Musk is looking for alternative sources of funding instead of the equity-backed loan.

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