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Five reasons the Elon Musk deal to buy Twitter could still fall apart

Stocks, tweets and shareholders could still derail the deal

Twitter accepted a $44 billion takeover offer from Elon Musk on April 25. Why did he want to buy the social media giant? (Video: Hadley Green, Julie Yoon/The Washington Post)
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SAN FRANCISCO — Elon Musk’s $44 billion deal to buy Twitter is moving along at breakneck speed — but before all the boxes are checked and the deal is finalized, there is still a risk it could fall apart.

The billionaire CEO of Tesla and SpaceX has said he wants to buy the social media site to promote free speech and has received both praise and backlash for his bid.

He has outlined his plan to finance the deal by taking loans from banks — and funding about $21 billion with his own equity.

Here are the risk factors the deal still faces.

Why did Elon Musk buy Twitter?

Twitter’s stock

Twitter’s stock price fell Wednesday to close at $48.64. That’s well below the purchase price — $54.20 per share — that Musk is set to pay for the company. Analysts said that indicates some investors were spooked the deal could fall through.

Twitter shareholders will get to vote to approve the deal, so Musk needs support from many of them.

By Thursday, after Twitter reported earnings that showed a growing number of users, the stock was up slightly.

Elon Musk’s Twitter takeover, explained

Tesla’s stock

Musk said he plans to fund about $21 billion of the deal with his own equity. Part of that will come from his significant stake in electric car company Tesla, where he serves as CEO, as collateral for the deal.

But Tesla’s stock dropped off steeply in price the day after Musk’s deal to acquire Twitter was announced. The drop carved $100 billion from the stock, in turn leading to a hit to Musk’s fortune. And it could jeopardize the financing for the deal if it drops too low.

Investors have worried about how much Musk is willing to risk because he could be sacrificing Tesla stock — which has performed exceedingly well — for the relatively underperforming Twitter.

Elon Musk spoke of potential Twitter job cuts with bankers

Tesla’s stock was still trading down more than 12 percent Thursday from its closing price Monday.

The company’s stock similarly plunged more than 10 percent two years ago, after Musk tweeted that “Tesla stock price is too high imo,” using shorthand for “in my opinion.”

Tesla’s value dropped Tuesday by more than double the cost of Twitter

Musk’s tweets

Musk, who has more than 88 million followers on Twitter, is a prolific poster on the site, sharing everything from updates on his rocket company to popular memes.

He’s also known for posting somewhat controversial or market-moving items that have gotten him into trouble with the Securities and Exchange Commission.

The terms of his deal to acquire Twitter allow him to tweet about his acquisition “so long as such tweets do not disparage the Company or any of its Representatives.”

A person familiar with the dealmaking process, who spoke on the condition of anonymity to describe confidential matters, said the clause only applies when Musk is tweeting or commenting about the deal itself, and therefore negative comments about Twitter outside of that do not violate the terms.

He has tweeted about the company many times since the deal was finalized, expressing support for encrypting private messages and saying, “Let’s make Twitter maximum fun!”

He’s also made jokes, such as tweeting: “Next I’m buying Coca-Cola to put the cocaine back in.” He followed it up by tagging the company in a tweet and saying, “Oh hi lol.”

But some of his tweets have concerned Twitter employees and researchers who study harassment on social media.

Musk elevated conservative criticism of two executives at Twitter, and other users quickly piled on — calling on Musk to fire one executive or using racist language to describe her. Musk’s tweets have a singular power to unleash mobs against people with much lower profiles.

It does not appear Musk’s tweets so far have violated the terms of the deal, though they have created some concern from workers and others.

Elon Musk boosts criticism of Twitter executives, prompting online attacks

A relatively low split fee

The terms of the deal include a $1 billion termination fee, which either Musk or Twitter would have to pay each other if they pull out of the deal for specific reasons.

Analysts say that fee, which is not unusual for a deal this size, is not large enough to prevent either party from walking away.

As part of the terms of the deal, Twitter cannot seek out other buyers, but it can entertain offers that may come in. If the company does get a better offer, it would probably have to pay the split fee. Musk could be called upon to pay the fee in specific circumstances, including if his funding doesn’t come through.

Musk could change his mind

Musk seems motivated to buy Twitter — he took a large stake in the company, contemplated joining its board, lined up a backup plan should his first bid fail and outlined funding for the deal.

He has succeeded on many fronts — putting electric cars on the road, sending rockets to space and helping to get Starlink satellite communication terminals to Ukraine’s government during the war.

But the billionaire hasn’t always followed through with his grand plans — or they have had mixed results.

The return of erratic Elon Musk: During coronavirus, Tesla CEO spreads misinformation and over-promises on ventilators

Most famously, he tweeted he had funding secured to take Tesla private at $420 a share. The SEC later fined him $20 million.

Musk offered to help Thai children stuck in a cave by developing a small submarine. It wasn’t ultimately used in the rescue, and some accused Musk of being a distraction. Early in the coronavirus pandemic, he promised to ship more than 1,000 ventilators to hospitals. Many of the machines he sent were noninvasive devices that can aid in coronavirus treatment but that typically don’t work for the sickest patients unless they are converted into more advanced machines.

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