Given the big drop in Tesla shares, will Musk have to lower his offer price to get the deal done if Tesla stock continues its electric slide? Will he walk away from Twitter entirely? Or could someone opportunistically come in with a higher price and some, uh, more secure funding? (This seems unlikely, since another bidder would have presumably stepped up to make an offer by now.)
Wall Street is not sure the deal can get done at the current offer price
Skepticism about the deal’s chances is growing.
Hindenburg is shorting Twitter stock, which means the firm would profit if shares fall. Hindenburg noted in its report that “we are supportive of Musk’s efforts to take the company private, and believe he could get it done, but see no reason why he should at these levels.”
Adding more debt to Twitter to help finance the deal would “make it more challenging to pursue Musk’s goal of reducing Twitter’s reliance on advertising, which currently comprises the vast majority of its revenue,” the firm noted.
And Hindenburg added that “placing both Twitter (and ultimately Tesla’s) future on a foundation of further equity-backed margin loans, or potentially more sales of Tesla equity amidst a volatile market, adds risk to both enterprises.”
Still, Twitter’s “economics” are mixed at best. The company reported quarterly user growth that topped forecasts late last month but revenue missed Wall Street’s estimates.
Analysts also seem to think that Musk will not succeed. Wall Street’s consensus target price is just $51.88 a share, about 10% higher than current levels but still more than 4% below Musk’s $54.20 bid.
What’s more, 32 of the 36 analysts following Twitter have the stock rated a “hold.” Only two recommend Twitter as a “buy” while the other two have “sell” ratings on the stock.
It may seem unwise to bet against the world’s richest person if he really wants to buy Twitter. But analysts — and Twitter investors — still aren’t convinced that Musk is going to get the deal done.