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Twitter Stock Plunges as Elon Musk Says Deal ‘Temporarily on Hold’

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Twitter stock is near where it was before the Tesla CEO’s initial stake of about 9% was disclosed.

Alastair Pike / AFP via Getty Images

A tweet from

Tesla

CEO Elon Musk sent

Twitter

shares sharply lower. Another sent the stock in the other direction.

The

Tesla

(ticker: TSLA) CEO said Friday his deal to buy Twitter (TWTR) was “temporarily on hold” pending a calculation related to the number of fake accounts on Twitter.

Hours later, Musk tweeted again saying “Still committed to acquisition.”

Twitter stock was down more than 18% in premarket trading. Following the second tweet, the shares were off 9.2% at $40.96 in late morning trading. That is close to the level Twitter traded at before Musk’s initial 9%-plus stake in Twitter was disclosed.

The original tweet was attached to a Reuters article from May 2 about the number of accounts on the social media platform that were bots and spam accounts. Twitter, in its first-quarter financial filing, said that those type of accounts represented less than 5% of what it calls its mDAU, or monetizable daily active usage.

Twitter and Musk didn’t immediately respond to requests for comment.

Holding the deal because of bots is a little surprising, given that bots aren’t a new issue. Musk has said several times that removing spammers and bots are important to increasing Twitter’s value. He hit the theme again this week when he spoke at the Financial Times Car of the Future conference.

Twitter “is the least bad public square, a forum for the exchange of ideas,” said Musk Tuesday. “It could be a lot better … in order to be better it needs to really get rid of the bots and the scams, scammers. Anyone trying to create fake influence on the site.”

If fake accounts represent more of Twitter’s registered users than he originally believed, Musk may not want to pay his original offer price of $54.20 a share.

Future Fund Active ETF
(FFND) cofounder Gary Black suggested Friday that Musk might want to renegotiate terms after the latest decline in Tesla stock.

Coming into Friday trading, Tesla stock is down about 36% since Musk’s stake in Twitter emerged. The

Nasdaq Composite
is down about 22% over the same span. It’s hard to say exactly how much of the excess decline in Tesla stock, relative to the index, is Twitter-related. Tesla is typically more volatile than the Nasdaq, rising more in good times and falling more in bad times.

Whatever the exact split, the decline in Tesla stock has wiped out about roughly $400 billion in market value since early April. Tesla stock was up 5.5% in Friday trading to $768.

The S&P 500 and Dow Jones Industrial Average rose 2.2% and 1.5%, respectively.

If the deal doesn’t happen. Musk might be on the hook for the $1 billion breakup fee which was negotiated as part of the deal. Musk paid about $36.15 a share, on average, for his initial 73 million shares of Twitter. He is still in the black at current levels.

Write to Al Root at [email protected]

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Krzysztof Stanowicz

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