Elon makes the headlines quite successfully in the last period. First with his name’s appearance in the Amber Heard and Johnny Depp trial, then with his Twitter saga. And finally now, with his backing up from the Twitter deal.
Critics and Twitter officials are not sure what might be the exact reason for this ‘putting on hold’ of the Twitter deal. However, the suspicion is that it is due to lowering the price.
Elon’s ‘Dog Ate The Homework’ Excuse Not To Buy Twitter
According to the billionaire, this is due to the controversy about whether there are less or more than 5% of spam or fake accounts on the platform. Initially, before starting the negotiations and deal conversations, Musk was under the impression that the platform has less than 5% fake accounts. However, as time passes, this is unveiling untrue, and the number might be much higher. Obviously, this is a game-changer for Elon.
Now, the chance that Elon will proceed with the deal and buy Twitter for $44 billion is less than 50% analysts say. He creates such an environment and puts himself in such a position to look like being scammed. While indeed what he really does is the opposite of that.
After this claim of his, Twitter’s stock market price fell by 10% this past Friday. This is by far the biggest drop that the company has ever faced in the last years of its existence.
Daniel Ives, an analyst at the Wedbush Services marks Elon’s backing up as a “dog ate the homework” excuse. According to him, the billionaire will use the new situation to completely back up from the deal or at least lower the price by a considerable amount.
Elon initially agrees to buy Twitter at a price of $54.20 per share when the stock market price is considerably lower than this. He then says that he doesn’t care about the economics of the purchase. However, now this seems to switch.
Now he seems to consider relevant the facts that he will not be able to ‘take’ his money back from the company. In the end, it is a rarity that the social media turns a profit and even rarely shows user growth. He obviously overpays for it, and he is suddenly awakening and aware of it.
In an official statement for the Wedbush Services Daniel Ives gives his opinion on the situation. “Our view is that Musk is committed to the deal. However, several things have caused Musk to get ‘cold feet’ on the Twitter deal. The massive pressure on Tesla’s stock since the deal, a changing stock market/risk environment the last month, and a number of other financing factors. The bot issue is more of a scapegoat to push for a lower price.”
According to Wedbush, Twitter is struggling with bots and fakes since its foundation. However, the platform’s founder and former CEO, Jack Dorsey is the one who clears up the platform greatly. During his ‘reign’ Twitter faces the greatest de-spamization.
According to Daniel Ives, the Elon needs to cut this act off and confess that this hold is because of money. That this is not because of the spam and fakes.
“And Musk knows that, which is why we view the $44 billion Twitter deal as having less than a 50% chance to get done as of today. All this in a changing market and with Tesla losing ~$300 billion of market cap since the deal.” – Ives says.
Elon enters the deal with an agreement on a break-up fee of $1 billion. That fee, to be honest, now seems like not enough for the social media. Even though they will take this $1 billion, the fall of the company on the market will be much greater than this. So he puts them in a situation where they will need to choose. The first option is to make money and sell out, but less than initially planned. And the second option is to collect the break-up fee and go through a major fall in the stock market. Or in other words lose more money.
So the genius billionaire saw an opportunity and took advantage of it. Since a claim like this will most certainly affect the stock price, why not use it to benefit from it.
Another important piece to the great picture is the billionaire’s favorite child, the Tesla company. Ever since he reveals that he is to buy Twitter, the stock market price of Tesla fell. This upset the billionaire and he sees an opportunity to go up in the stock market just by holding the Twitter deal.
As soon as he announces this ‘major’ bump on the road to buying Twitter, Tesla’s price popped by more than 5%. The investors are seeing this possible breaking up of the Twitter deal as a fact that will make Elon less likely to sell large shares of Tesla. So not surprisingly, Elon wins again. He has higher stock market price for Tesla. He has Twitter on its knees and will pay less than initially planned to buy it. A complete win-win situation.
Finally, everybody is aware of the spam, or fake accounts fact for any social media. How many times we’ve received friend requests, follow requests, or messages from spam accounts? How often does this happen to us, the common people? Imagine the scale that this is happening on to celebrities and popular people on Twitter. This is not something that can catch anyone by surprise. Except for Elon maybe. He was not aware of this until now.
“The bot issue at the end of the day was known by the New York City cab driver and feels more to us like the ‘dog ate the homework’ excuse to bail on the Twitter deal or talk down a lower price.” –the Wedbush Services conclude.
