NEW YORK, Oct 4 (Reuters Breakingviews) – What still seemed like a coin-flip early on Tuesday became a real possibility in the afternoon: Elon Musk says he is actually going to buy Twitter(TWTR.N) for $44 billion. After nearly a half-year of ridiculous shenanigans, investors may get a win, as could a board that looked to have made several mistakes. For others, though, Musk’s capitulation will be painful.
Almost as quickly as Musk said he wanted to buy Twitter, he decided the deal wasn’t for him. When he made his proposal in April, the board quickly sealed an agreement without conducting an auction. Musk lined up investors who committed huge sums alongside him without asking questions. Not long after, Musk started a campaign against the company accusing it of hiding fake accounts. By July, he wanted out.
The case was set to head to trial on October 17. Meanwhile, both debt and equity markets look nothing like they did when the deal was first signed. Rising rates have made technology company valuations plummet. Debt investors are clamping their wallets tight, as those rates make yesterday’s deals look foolish.
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Nevertheless, Musk, per a U.S. Securities and Exchange Commission Filing, wants the deal to go through, without additional explanation. Twitter probably wants a Delaware judge to seal an airtight settlement before popping the champagne. The company couldn’t be blamed for worrying this is just another chess move in the back-and-forth saga. But if everything comes together, the deal could close within days.
That would leave quite a predicament for banks. They are on the hook for $13 billion in financing. Morgan Stanley , leading the deal for Musk, already reported $282 million of losses tied to loans last quarter. But Musk’s unpredictability may have meant some banks didn’t yet account for potential losses on their Twitter loans. Realizing those losses would be both unexpected and painful.
For Twitter, the future is unclear. Musk has said the company effectively lied about its metrics, appeared to violate non-disclosure and non-disparagement obligations, and tweeted Chief Executive Parag Agrawal a poop emoji. Operationally, too, it faces plenty of challenges.
How much attention those challenges can get from Musk, busy running $780 billion carmaker Tesla (TSLA.O) and other ventures like SpaceX, is an open question. Twitter shareholders certainly stand to win big. Twitter itself may be in for a rocky ride.
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(The author is a Reuters Breakingviews columnist. The opinions expressed are their own.)
CONTEXT NEWS
Billionaire Elon Musk intends to complete his $44 billion acquisition of social network Twitter on the parties’ previously agreed deal terms, according to a Securities and Exchange Commission filing.
In July, Musk sought to terminate the transaction, alleging that Twitter had not complied with contractual obligations and underreported how many of its accounts are automated spam. Twitter sued Musk in the Delaware Court of Chancery to compel him to complete the deal, with a trial scheduled for Oct. 17.
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Editing by Lauren Silva Laughlin and Sharon Lam
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