Elon Musk’s $44 billion acquisition of Twitter is still expected to close next week, analysts and a source familiar with the deal said, despite a curveball report about a possible national security review that sent Twitter shares tumbling. on friday.
Twitter shares closed down 4.9% at $49.89 after a Bloomberg report that the Biden administration is considering investigating potential national security risks from the deal.
US officials were reportedly concerned about Musk’s recent threat to disrupt SpaceX’s Starlink internet service in Ukraine, which he has since walked away from, as well as a report that he discussed war with Vladimir Putin. Musk denied the story, saying he had not spoken to Putin since before the war began.
A source close to the deal said Musk is “still on track” to buy Twitter by next Friday’s court deadline. The source described the Bloomberg story as “political noise.”
Twitter declined to comment. A lawyer for Musk did not immediately respond to a request for comment.
A hedge fund analyst following the case closely outlined four scenarios involving the potential national security investigation.
The first and most likely scenario, the analyst said, is that the Biden administration does nothing to block the deal before it is completed or punish Musk afterward.
Blocking the deal would require moving too quickly before it is expected to close by Oct. 28, while seeking to water it down after it is done would set the stage for a nasty political fight.
The second most likely outcome is that the US forces Musk to exclude foreign co-investors such as Cayman Islands-based crypto exchange Binance – which is said to be under investigation by the Justice Department – and Qatar’s sovereign wealth fund. Saudi Prince Alwaleed bin Talal, who already owns a large chunk of Twitter that he had planned to transfer to Musk’s new company, could also be ruled out.
Removing foreign investors could force Musk to come up with more cash, potentially by selling Tesla stock, but it won’t prevent him from owning the company.
Elon Musk is “still on track” to buy Twitter, according to a source close to the deal.
The Biden administration was reportedly concerned about threats by Elon Musk to shut down Starlink Internet service in Ukraine.
A third option is that the Biden administration’s Committee on Foreign Investment in the United States could force Musk to sell Twitter months after the deal closes, likely at a huge loss.
Musk said this week that he is “definitely overpaying” for Twitter at $44 billion — and analysts say the company should really be worth something in the $20 billion range. A recession next year could drive that price even lower.
A fourth scenario that the hedge fund analyst called “very, very unlikely” is that the Biden administration moves to block the deal within the next week before the deal officially closes, allowing Musk to avoid owning Twitter.
That would give Musk the escape route he appeared to spend months trying to find before agreeing in early October to buy the site for $54.20 a share.
