Tesla Stock Jumped. Elon Musk May Back Away From Its Twitter Deal.

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Tesla CEO Elon Musk.

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Patrick Plull / Poole / AFP via Getty Images

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Tesla stock jumped after Elon Musk filed 13D saying he may walk away from the agreement to buy Twitter because of the spam bot problem.

Tesla (ticker: TSLA) stock closed the day up 1.6% at $714.84, though it was already trading higher amid signs of improving EV demand in China.

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The S&P 500 rose 0.3% and the Dow Jones Industrial Average gained 0.1%.

Shares of Twitter (TWTR) fell 1.5% to $39.56. Musk’s potential purchase price is $54.20 per share.

A filing with the Securities and Exchange Commission read in part: “On June 6, 2022, the reporting individual delivered a letter to the issuer reiterating its request for certain data and information to avoid spam and fake accounts on the issuer’s platform.” necessary to facilitate the assessment.”

Musk wants to better understand how spammy a daily active use of Twitter is. Twitter said it’s about 5%. Musk believes it is too much. If it is higher then it affects how much revenue can be generated on the platform. Twitter makes money by selling ads and advertisers will not advertise to bots.

letter attached The SEC filing added: “Based on Twitter’s behavior to date, and in particular the Company’s latest correspondence, Mr. Musk believes that the Company is exercising its information rights (and the Company’s related obligations) under the merger agreement.” This is a clear material breach of Twitter’s obligations under the merger agreement and Mr. Musk reserves all rights as a result, including his right not to terminate the transaction and to cancel the merger agreement. their right to terminate.

The risk of the deal not being completed is because Twitter’s stock is low.

It’s likely the reason Tesla shares were even higher. Tesla stock has fallen nearly 40% since the announcement of Musk’s initial stake in Twitter. The threat of management distraction may be one reason why Tesla investors have less-than-favourable opinions about the deal.

Other things have affected Tesla’s stock as well as the COVID lockdown in China that has disrupted production at Tesla’s Shanghai plant. The overall market is also very weak. The Nasdaq Composite is down nearly 17% since the disclosure of Musk’s stake in Twitter.

Adjusted for regular trading volatility, Tesla investors would have expected Tesla’s stock to drop roughly 30% along the Nasdaq. An additional few percentage points of underperformance can be attributed to Tesla-specific issues, including the Twitter overhang.

Write to Ben Levison at [email protected]

Credit: www.marketwatch.com /

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