Elon Musk’s bold plan to buy Twitter depends partly on how his investment in Tesla is doing. Uh-oh.
Shares of Tesla (TSLA) have plummeted about 20% since Musk first disclosed plans to buy all of Twitter and take it private. That’s a key reason why Twitter’s stock (TWTR) is now more than 10% below Musk’s proposed $54.20 a share purchase price. Twitter’s stock is hovering around $47.50. That’s only a bit above the $46.76 midpoint between Musk’s takeover offer price and $39.31 — the price at which Twitter shares were trading when Musk first disclosed that he had taken a more than 9% stake in the company early last month. This seems to suggest investors have doubts about whether Musk will get the deal done at the original price, despite the fact that he recently lined up more than $7 billion in financing from an impressive group of investors that includes mutual fund powerhouse Fidelity, venture capital giant Sequoia and Oracle (ORCL) co-founder Larry Ellison. Musk also has a commitment from Morgan Stanley (MS) for $12.5 billion in financing backed by margin loans that use his Tesla stock holdings as collateral. Given the big drop in Tesla shares, will Musk have to lower his offer price to get the deal done if Tesla stock continues its electric slide? Will he walk away from Twitter entirely? Or could someone opportunistically come in with a higher price and some, uh, more secure funding? (This seems unlikely, since another bidder would have presumably stepped up to make an offer by now.
