Elon Musk saying Twitter deal on hold is a 'circus show move,' Wedbush's Ives says
Elon Musk's "bizarre" tweet this morning that his deal to buy Twitter (NYSE:TWTR) was "temporarily on hold" to determine whether 5% of the accounts are spam or fake accounts is reminiscent of a "circus show" and could eventually turn into a "Friday the 13th horror show," Wedbush Securities analyst Dan Ives said.
Ives noted that there could be three potential outcomes as a result of the tweet: it could fall apart entirely; Musk could negotiate for a lower price; or the enigmatic 50-year-old Tesla (NASDAQ:TSLA) chief could walk away from the deal with a $1 billion breakup fee.
"In our opinion, with the nature of Tesla shares being used as leverage for Musk in the deal, the massive sell-off seen in Tesla and the overhang created by this deal has turned into a life of its own," Ives wrote in a note to clients, adding that it's likely to be positive for Tesla (TSLA) shares.
Twitter (TWTR) shares fell more than 15% to $37.91 in premarket trading on Friday, while Tesla (TSLA) jumped more than 5% to $765.60.
UPDATE: Musk tweeted that he is "Still committed to acquisition."
In addition, Ives noted that if Musk does eventually decide to go through with the deal to buy Twitter (TWTR), there is a path to a "clear renegotiation" due to a number of different topics, including financing, using Tesla (TSLA) shares as leverage, his prior financing partners and how Twitter employees react.
"The nature of Musk creating so much uncertainty in a tweet (and not a filing) is very troubling to us and the Street and now sends this whole deal into a circus show with many questions and no concrete answers as to the path of this deal going forward," Ives added.
On Thursday, Twitter (TWTR) experienced some leadership turnover and it was reported that it was freezing hiring due to the uncertainty surrounding the deal.