Twitter deal spread indicates uncertainty on Musk closing $44B acquisition
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The spread between where Twitter (NYSE:TWTR) is trading and the $54.20/share Elon Musk agreed to pay indicates that investors appear to be concerned if the $44 billion deal will ever close.
Twitter is currently trading at a 9.6% discounts to Musk's $54.20 deal, wider than the 4.6% discount on Monday when transaction was announced. In contrast, the current spread in Google's $5.4 billion acquisition of Mandiant is at 4.4%, for a deal that received a second request from the Justice Department earlier last month.
Investors have multiple concerns about the transaction from Musk's financing the deal partly with loans backed by Tesla (TSLA) to potential regulatory concerns from a Biden administration focused on big tech. Although the deal looks to be clean from an antitrust perspective, some fear U.S. regulators could use concern to delay a deal close, which is scheduled for about six months.
"This administration appears to be politicizing antitrust in a way that we haven't seen since Nixon injected himself into ITT," David H. Evans, an attorney with Kelley Drye & Warren said in an interview. "It is not outside of the realm of possibility that we will see a second request. Most importantly, it's tech. They will use HSR to educate themselves. Secondly, HSR happens to be a very easy, and for the uninitiated, uncontroversial, way to delay consummation of the transaction and thus delay any changes Musk may want to make. A second request will take 12 to 18 months to complete. That happens to be well past the midterm elections."
The deal has already drawn some regulatory scrutiny from the Federal Trade Commission, tied to his disclosures around the nascent deal, The Information reported on Thursday.
âPrior to Biden administration, this would be a no brainerâ as far as antitrust approval, Evans explained. âItâs a very clean deal from a substantive antitrust perspective.â
Some major Senate Democrats are already mulling asking Musk to testify on his plans to acquire Twitter (TWTR). There are no imminent plans to hold hearings, Senate Commerce Chair Maria Cantwell told Bloomberg in an interview on Thursday. Senator Ed Markey, also a member of the Commerce Committee, told the news outlet that a hearing on Musk was necessary given Twitter's relevance.
"We see some potential for delays driven by Twitter's role in the geopolitical environment as well as the long shadow that Musk casts on financial markets, including SEC violations," MKM Partners analyst Rohit Kulkarni and desk analyst Michael Lesser wrote in a note last week. "We wouldn't be surprised if Musk makes a couple of trips to the Capitol, in order to elaborate on his tweets and his future plans for revamping TWTR's policies. However, we do not expect any showstopper hurdles posed by U.S. or EU regulatory authorities that would overturn or halt this acquisition."
The deal not only needs U.S. antitrust approval, but the European Union, Japan, and the United Kingdom also have to weigh in on the transaction, according to the definitive merger agreement. 
The potential downside in a deal break likely also has investors on edge, as some analysts see Twitter (TWTR) with standalone values ranging from low $30s/share to low $40s in the absence of a transaction.
The billionaire Tesla and SpaceX (SPACE) founder himself has the potential ability to derail the Twitter deal. Musk is barred from sending disparaging tweets about the $44 billion transaction, according to the merger agreement. 
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