Elon Musk's Twitter clown car
Before dawn on Friday the 13th, Elon Musk may have murdered his Twitter takeover.
Driving the news: The mercurial Musk at 5:44am ET tweeted: "Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users."
- He also linked to a Reuters story about that spam estimate, which was from nearly two weeks ago.
- At 7:50am, Musk added: "Still committed to acquisition."
If Musk really needs details supporting that calculation, then why not privately ask the management team with which he's barely had any contact? Or the board? And then, if the numbers don't check out, walk away. Maybe he'd even have been able to get out of his $1 billion breakup fee, arguing that Twitter misrepresented user metrics.
- He also could have conducted due diligence before agreeing to buy the company, which sources say is something acquirers sometimes do.
Instead, this only intensifies speculation that Musk has buyer's remorse. Not only because he arguably overpaid, but also because of the amount of paper value he's lost on Tesla stock (and possibly crypto holdings) since the Twitter deal was first announced.
- There's a reason Twitter was trading around $10 per share lower than Musk's purchase price, which is way wider than typical merger arbitrage. (FYI: Musk isn't limited under a standstill agreement, so theoretically could buy discounted Twitter shares on the open market, but the poison pill remains in effect).
What to know: Axios' Felix Salmon called this situation a "clown car" during a phone conversation yesterday, harkening back to an old Mark Zuckerberg comment, after Twitter CEO Parag Agrawal canned two senior product executives and announced a hiring freeze. Again, that was yesterday.
- At the time, it felt like Agarwal was auditioning for Musk. Still does, but now he has much more credibility for the "I have a business to run and revenue targets to hit" line.
The bottom line: It's possible, perhaps even likely, that this is Musk's way of trying to renegotiate. But if so, it's creating a ton of short-term collateral damage.
- Not only to Twitter and Musk's reputations, but also to the psyches of thousands of employees whose financial futures are being put in unnecessary flux. Remember, lots of these people have options that accelerate if the deal closes. And others could be needing to find new jobs, right as the tech industry appears to be contracting.