Big news came out Tuesday that Tesla Inc TSLA CEO Elon Musk has had a change of heart and submitted a renewed offer to acquire social media platform Twitter Inc TWTR at the original $54.20 per-share price he walked away from. Benzinga talked to a merger and arbitrage expert to break down the new deal.
What Happened: Musk submitted a new proposal to Twitter to acquire the company for $54.20 per share, or $44 billion, in line with a previous deal submitted. Twitter sued Musk after he said he was walking away from the deal.
“Musk just indicated he will close on the terms at $54.20. All conditions have been satisfied and debt financing is committed. It’s looking like this is a done deal,” Accelerate CEO Julian Klymochko told Benzinga.
Klymochko, who estimates he has analyzed over 2,500 mergers and acquisitions, previously told Benzinga that Musk couldn’t simply walk away from the deal.
“I am surprised that he did not try to negotiate a lower price to settle the case. I believed that a negotiated settlement at approximately $50 per share would be the most likely outcome.”
Klymochko called the new proposal from Musk a great result for the arbs.
One item that analysts weighed before an Oct. 17 court date was the impact of the whistleblower alleging Twitter had known about security and bot issues.
“The whistleblowers were a sideshow and had zero positive effect on Musk’s arguments, which were flimsy to begin with.”
Ahead of the court date between Twitter and Musk, texts from the Tesla CEO discussing the Twitter deal.
Klymochko points to a text from Musk that could have been a “dagger to his case.”
Musk texted, “it won’t make sense to buy Twitter if we’re heading into World War III.”
“At this point, a definite agreement was already signed, and this stipulation was not a condition of the deal. It made it obvious that he was looking to back out given market conditions, not due to a breach of the DMA.”
Related Link: Elon Musk Texts Revealed For Twitter Lawsuit: Exchanges With Joe Rogan, Gayle King, Jack Dorsey And More
Why It’s Important: Klymochko has been confident that a deal would be reached between Twitter and Musk, either at the $54.20 agreed price or a lower offer.
While some analysts and experts argued that Musk could walk away due to concerns over bots, Klymochko suggested a good opportunity to buy Twitter shares as an arbitrage trade, capturing the difference between the current share price and the acquisition price.
On Tuesday, Wedbush analyst Daniel Ives shared his take on Musk announcing a new proposed deal to buy Twitter.
“This is a clear sign that Musk recognized heading into Delaware Court that the chances of winning vs. Twitter board was highly unlikely and this $44 billion deal was going to be completed one way or another,” Ives said.
Klymochko added that the Twitter deal shouldn’t have a material impact on several other social media stocks that were moving Tuesday.
Shares of Digital World Acquisition Corporation DWAC fell Tuesday on Musk’s new deal, as some believe it could open the door for former President Donald Trump to rejoin the platform.
Rumble RUM shares were also volatile on Tuesday, as the company could be a winner from Musk owning Twitter and pushing for free speech changes.
“DWAC and RUM are sentiment and hype-driven retail stocks. Their stock prices have no bearing in reality and therefore, their share price moves make no sense to rational investors,” Klymochko said.
Klymochko previously told Benzinga that he believed the merger between Trump Media & Technology and Digital World Acquisition would not close, citing a lack of progress on proxy filings and several existing subpoenas.
TWTR Price Action: Twitter shares are down 0.9% to $51.56 on Wednesday.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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