Twitter joins market lower as eyes turn to whether Musk deal can close quickly

Elon Musk To Buy Twitter

Scott Olson

Twitter stock (NYSE:TWTR) is 2% lower today, giving back some of Tuesday’s 22% gain as the whole Internet sector bleeds a little red – but arguably doing significantly better than most rival stocks, after developments in the company’s $44B buyout deal with Elon Musk.

Tuesday brought news that Musk’s attorneys had sent a letter to Twitter (TWTR) saying Musk wanted to proceed to completing the deal at the agreed price – but with a couple of conditions noted that made it premature to assume the drama was over.

Musk’s team said it intended to proceed to closing “provided that the Delaware Chancery Court enter an immediate stay of the action, Twitter vs. Musk, et al. … and adjourn the trial.” It also said the deal was “pending receipt of the proceeds of the debt financing,” a likely outcome, though the past few month’s turn in the credit markets mean financiers are facing heavy losses in the deal.

Twitter acknowledged receiving Musk’s letter with a terse statement – “The intention of the Company is to close the transaction at $54.20 per share” – that suggests no stay of the legal action is forthcoming yet. And no action in Delaware’s Court of Chancery so far suggests anything other than full speed ahead on the litigation.

And that means to stay tuned for more Wednesday headlines. Final witness lists are due at the end of the day, and with the trial’s start just 12 days away, a rescheduled (and contentious) deposition of Musk is still set to begin in Austin on Thursday and it seems like only more deal certainty – such as a legal capitulation by Musk – will head it off.

Money in the bank (i.e., a closed deal) would serve the same purpose, but that would call for some quick and heavy action from banks that have committed $12.5B into the $44B take-private deal – and as mentioned are facing heavy losses. That consists of $6.5B in loans, $3B in secured bonds and $3B of unsecured bonds, along with a $500M million revolving credit facility.

Tesla stock is on watch here as well, since any quick cash needs from Musk (who’s personally on the hook for $33.5B in the Twitter deal) would mean a selldown; Tesla (NASDAQ:TSLA) is down 6% heading into midday Wednesday.

Earlier, Loup Ventures analyst Gene Munster says that assuming Musk ends up owning Twitter, the billionaire isn’t expected to spend much time there: “He clearly doesn’t want this asset.