MarketWatch First Take: Elon Musk is likely trying to get a lower price for Twitter

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Is Elon Musk’s $ 44 billion bid for Twitter actually a $ 1 billion joke by the world’s richest man?

That’s a possibility that cannot be ignored, as investors scramble to make sense of Musk’s latest shenanigans early Friday morning. He said, on Twitter, instead of in a U.S. regulatory filing, that his $ 54.20 per share offer for the company is “on hold,” pending details that support a calculation that fake accounts represent less than 5% of all Twitter users.

When the market opened on Friday, Twitter’s TWTR, -9.67% shares fell nearly 9%. It’s worth noting that since Musk’s April 14 unsolicited offer to buy Twitter, its stock has never actually reached the offer price, reaching a high of $ 51.70 on April 25 in recent weeks, only neared or surpassed Musk’s offer a few times.

See also: Musk’s ‘bizarre tweet’ is the latest reminder that retail investors eyeing Twitter should proceed with caution

A couple of hours later, Musk tweeted that he was “still committed to [the] acquisition,” but the saga now has to be reminding investors of his infamous “funding secured” tweet in 2018, when he was in talks to take Tesla Inc. TSLA, +5.71% private. That tweet led to an inquiry by the Securities and Exchange Commission and to his own personal battle with regulators over what he can say on Twitter as the chief executive of a publicly traded company.

“The implications of this tweet will send this Twitter circus show into a Friday the 13th horror show as now the Street will view this deal as 1) likely falling apart; 2) Musk negotiating for a lower deal price; or 3) Musk simply walking away from the deal with a $ 1 billion breakup fee,” said Wedbush Securities analyst Dan Ives, in a note to clients.

Twitter’s board had actually accepted Musk’s offer and was prepared to go ahead with his ownership, and his plans to take the company private, even as many employees were opposed to the deal and vocalized their concerns.

Musk clearly is trying to get the price of the deal down, since Tesla’s stock price has plunged in the overall market downdraft of the past few weeks. “It’s a different market than it was 30 days ago,” Ives said in a phone interview. “When Tesla loses $ 300 billion in market cap, the story changes.” Musk is using some of his Tesla stock to come up with some of the cash and using shares as collateral for the loans to finance the deal.

 “It’s hard to be surprised that the deal is temporarily on hold,” said New Constructs CEO David Trainer in an email statement. “The speculative forces that have been artificially boosting stock prices over the past few years are waning and that changes the calculus for deals like Musk/Twitter getting done.”

Twitter’s board, though, is now in a difficult situation. After realizing there were no other offers coming in as a white knight to save it from Musk’s hostile bid, the board agreed to a deal with Musk. The issue of spam or fake user accounts is a well-known dynamic that Twitter has been working on for the past couple of years.

“They could be a little off of what they estimated at Twitter, but it’s not dramatically off, Dorsey and his team cleaned that up,” Ives said. “It comes up in due diligence, but in a million years, the deal not should be suspended because of this.” Now Twitter investors and the board are between a rock and a hard place, he said.

“It could go one of  two ways, he [Musk] walks and pays the billion or a lower price comes into play,” Ives said. “And if he walks, Twitter’s stock goes to the low-30s.”

Angelo Zino, an analyst at CFRA Research, said that he believes for Musk’s own personal wealth, “walking away may be in his best interest.”