Ahead of a special meeting of Twitter, Inc. TWTR shareholders in the summer to approve the take-private deal, an analyst at Wedbush said he sees a "greater looming uncertainty" surrounding the completion of the transaction.
The Twitter Analyst: Daniel Ives maintained a Neutral rating on Twitter shares and reduced the price target from $54 to $43.
The Twitter Thesis: Twitter shareholders are likely to approve the $44 billion transaction but Elon Musk and his team are still sifting through raw data related to bot accounts to determine if they are 5% or less, analyst Ives noted.
The uncertainty around the deal has caused chaos at Twitter and the company’s stock is currently trading around $39 compared to the $54.20 per share offer price, the analyst noted.
The discrepancy reflected investor skepticism regarding the completion of the deal at the current bid price, the analyst said. The deal has also resulted in an overhang on the Tesla, Inc. TSLA stock since April, given Musk’s financing commitment.
Ives now sees three paths ahead:
- Less than a 5% chance that the deal closes without issues at $54.20
- 60% chance of the deal materializing at a renegotiated price in the range of $42-$45 per share
- 35% chance of Musk seeking to exit the deal by paying a $1 billion break-up fee
The analyst sees the third possibility as leading to a long-drawn battle between the Twitter board and Musk in court.
“We expect more details on the fake account/bot issue over the coming weeks from Musk which will determine the next step in this likely deal negotiations,” Ives said.
The analyst also sees the financing component is complex, given the looming debt financing for a $44 billion deal for a company with a market-cap of around $30 billion, currently.
Twitter Price Action: Twitter shares traded 4% lower at $37.22 on Friday, according to Benzinga Pro data.
© 2022 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.