- Tesla (NASDAQ:TSLA) CEO Elon Musk has halted his Twitter (NYSE:TWTR) deal
- TSLA stock is up as a result, as investors would prefer the CEO to focus on the electric vehicle (EV) company
- Tesla and Twitter investors alike are anxious to see what happens next
Tesla (NASDAQ:TSLA) is up today on the news that Elon Musk’s acquisition of Twitter (NYSE:TWTR) may fall through. Shares of TSLA stock have jumped 4% in premarket trading this morning after the CEO hinted that the deal may not happen. As of this writing, they are up 3.8% and show no signs of slowing down.
Since reports that the deal may fall through began to circulate last week, TSLA stock has been quite turbulent. Let’s take a closer look at the factors pushing it up today.
What Elon Musk’s Twitter Deal Means for TSLA Stock
TSLA stock did not react well to the confirmation of Musk’s Twitter acquisition. It’s not hard to see why. For investors, the prospect of Musk taking on another large company, particularly one in a completely different space, wasn’t encouraging. It didn’t help when Musk laid out plans to compile his assets under a single holding company. This decision stood to reduce the company’s earnings per share (EPS) and price-to-earnings, thereby pushing TSLA stock down. Since Musk first revealed his 9.2% stake in Twitter in April 2022, TSLA has fallen by more than 30%.
Almost one month after Twitter’s board of directors accepted Musk’s offer, the deal now hangs in the balance. This morning, he tweeted that the deal “cannot move forward” until the platform provides him with full details of its bot account statistics.
20% fake/spam accounts, while 4 times what Twitter claims, could be *much* higher.
My offer was based on Twitter’s SEC filings being accurate.
Yesterday, Twitter’s CEO publicly refused to show proof of <5%.
This deal cannot move forward until he does.
— Elon Musk (@elonmusk) May 17, 2022
As the New York Times reports, though, some experts see this as Musk maneuvering to drive down the acquisition price. Others have suggested that he is searching for a way out of the deal all together. If he were to back out completely, it would send TSLA stock up even more. However, it doesn’t seem likely that he would completely abandon the acquisition after dedicating so much time securing the financing for it.
What It Means
Musk’s unpredictable nature makes it difficult to assess the situation fully. What we do know is that less than one month ago, he made clear his commitment to a Twitter takeover. It makes sense that he would want to try to bring the overall cost down. $44 billion is a hefty sum, even for the world’s wealthiest person. He can’t expect to lower it by too much, though. His initial offer of $54 per share appealed to Twitter investors because it was higher than the current price. Shareholders likely won’t accept a lower offer, and the board of directors may opt to take its chances with the market.
Musk backing out of the deal would also please his own investors at Tesla. It could allow him to continue devoting time and resources to the company that made him famous at a time when demand for electric vehicles is steadily increasing across the globe. It would make sense to focus on helping Tesla scale production, and Musk knows it. As the company’s primary shareholder, it would also be good for him. Attempting to acquire Twitter pushed TSLA stock down, but Musk has the ability to send it back up.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
