Few events in recent history have elicited such handwringing and lamentations from the left as the possibility that Elon Musk might own Twitter.
But have all their tears been for naught? The deal that Musk has crafted to buy the social media giant is fragile and could unravel as fast as it was put together.
One indication is the market — usually a pretty good indicator of what’s going to happen. Twitter shares plummeted after investors began to look more closely at the deal. Musk promised to make a $21 billion cash contribution to finalize the agreement but investors are questioning whether Musk will want to sell off some of his Tesla stock to make that happen.
Musk also has a history of changing his mind. Recall the announcement that he had secured funding to take Tesla private in 2018 and then he didn’t move on the deal. He also said he’d take a seat on the Twitter board and then backed out.
There are a lot of moving parts to the Twitter deal and investors aren’t convinced Musk can make it happen.
There are good reasons for him to get cold feet. The biggest is Tesla. The electric-vehicle maker’s stock has fallen around a fifth since Musk first revealed his stake in Twitter, partly because Musk may sell shares to fund his new adventure. If Tesla’s stock bounces back – likely if the Twitter deal falls away – the $40 billion of recouped wealth would more than make up for the break fee.
China is a major sticking point too. Tesla produces half of its vehicles there, as well as a quarter of its revenue. But Twitter is no friend to the People’s Republic, most recently for defying Beijing in its handling of content related to Hong Kong protests. China could easily hold Tesla to ransom if a Musk-owned Twitter didn’t play ball. That’s uncomfortable for a self-professed “free speech absolutist.”
But the real deal-breaker for Musk may be politics. It’s not just left-wing Americans who are having a conniption fit about Musk buying Twitter. Europeans have a far different notion of “free speech” and possess far greater power to do something about it.
In reality, Musk’s absolutism probably won’t survive a Twitter deal anyway. European Union Commissioner Thierry Breton told the Financial Times this week that the company must police illegal or harmful content or risk being banned. In the United States, where regulators are less aggressive, other technology firms could effectively create the same threat. Apple, for example, gets to decide which apps appear in its influential store.
At this point, if Musk backs out he’d be liable for a $1 billion walk-away fee. It’s not exactly pocket change even to a guy who’s worth $240 billion. But by walking away, Musk would ease the concerns of Tesla investors. The value of the car company has dropped more than 12% since the announcement that Musk would buy Twitter — about $40 billion. The Street thinks Musk would recoup that much and more if he called off the Twitter deal — making that $1 billion penalty seem small indeed.
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It will depend on how committed Musk is to his idea of building an inclusive platform where just about anything goes as far as speech is concerned. If he’s very serious and committed, he may see it through to the end.
But if Musk believes the fight isn’t worth the effort, he will probably fold and look for something else with which to amuse himself.
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