Musk Might Have Ulterior Motives in Surprise Move

It could be a bargaining ploy, or he could be trying to avoid a big penalty for ditching the deal
By John Johnson,  Newser Staff
Posted May 13, 2022 2:26 PM CDT
Now What, Elon?
Elon Musk, in a file photo.   (AP Photo/Matt Rourke, File)

(Newser) – Elon Musk surprised the tech world Friday morning by putting his deal to buy Twitter on hold. His stated reason is that he needs to investigate just how many spam accounts are on the platform, but one theme in coverage is that industry analysts sound pretty skeptical about that:

  • Not buying it: “To claim that this is the reason that he's putting the deal on pause, it's not credible,” Sara Silver of Quinnipiac University tells the AP. “This is not a new issue for him. It's not just entering his consciousness now.” Musk himself has been tweeting about the issue since 2018.
  • Bargaining ploy? The Wall Street Journal raises the possibility that Musk might be trying to negotiate a better price. Twitter's stock cratered when the news broke, though it recovered somewhat when Musk later tweeted that he was "still committed" to a deal. Still, the stock was trading about 23% lower than the $54.20-per-share deal price. “This is probably a negotiation tactic on behalf of Elon,” Toni Sacconaghi, an analyst with Bernstein, told CNBC’s Squawk Box. “The market has come down a lot. He’s probably using the guise of true active users as a negotiation ploy.”

  • Penalty: Under his deal, Musk might have to pay a $1 billion penalty if he walks away. But there's a lot of wiggle room here. If Musk shows that his concern about fake accounts is legit—and that Twitter wasn't forthright about them—he might avoid a penalty. On the other hand, CNBC reports he could be on the hook for billions in damages—in addition to the $1 billion fee—if the deal does indeed fall apart and Twitter successfully sues him for breach of contract.
  • Inevitable? Axios reports that speculation has been mounting of late that Musk might have to walk away from the hastily arranged deal. This could be his justification for doing so. "For Musk to liquidate a significant amount of his Tesla stake and to wrangle bankers into giving him billions of dollars in financing, only to backtrack due to a single article, shows how manic the entire takeover process has been."
(Read more Elon Musk stories.)

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