'Eccentric' Musk May Reverse Twitter Acquisition... Investors Are Anxious

Concerns Over Musk's Reversal of Twitter Acquisition
① Musk's Past Erratic Behavior ② Tesla Stock Decline
③ Negative Views from Jung (China) on Twitter ④ Potential Pressure from EU and Other Regulators

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] Elon Musk, CEO of Tesla, who is set to acquire social networking service (SNS) Twitter, may once again engage in ‘eccentric behavior.’ The market is uneasy about the possibility that Musk might back out of the Twitter acquisition agreement. This is due to his history of flip-flopping on business matters and analyses suggesting that the acquisition itself could negatively impact his current core business.

On the 27th (local time), Twitter’s stock closed at $48.64 on the New York Stock Exchange, down 2.09% from the previous day. In this context, cautious speculation is emerging in the market that Musk might not go through with buying Twitter. In fact, a major foreign news outlet reported that "Musk is proceeding seriously with the Twitter acquisition deal but could change his mind later."

This article came after Twitter disclosed to the U.S. Securities and Exchange Commission (SEC) that Musk would have to pay a $1 billion (approximately 1.25 trillion KRW) penalty if he fails to complete the acquisition. Considering the acquisition size of $44 billion and that Musk is financing most of it through loans, the market views the penalty as relatively small. There is a possibility that Musk might pay the penalty and cancel the acquisition altogether.

Notably, Musk has reversed his statements multiple times in the past. In 2018, he tweeted that he was considering taking Tesla private, only to retract the statement a few days later. At that time, Tesla’s stock price fluctuated wildly, causing significant market turmoil. Subsequently, Musk was fined by the SEC and agreed to a ‘shackle’ requiring pre-approval of his social media posts.

Earlier, in 2016, Musk tweeted that he would create a candy company to compete against See’s Candy, which Warren Buffett’s Berkshire Hathaway had invested in since 1972, opposing Buffett’s investment principles, but later retracted the statement. In the case of the Twitter acquisition, many stakeholders including Morgan Stanley and Twitter’s board were actively involved and reached an agreement, so reversing the deal would not be easy. However, given Musk’s history of unpredictable and eccentric behavior, the possibility of reversal cannot be ruled out.

First, the Twitter acquisition is negatively affecting Tesla, Musk’s main business. Since Musk disclosed his Twitter stake purchase on the 4th, Tesla’s stock has fallen more than 23%. The stock decline continues amid speculation that Musk might sell his shares to secure funds for the Twitter acquisition. If Musk cancels the Twitter acquisition under these circumstances, Tesla’s stock price could rebound, and Musk’s assets could increase enough to cover the penalty and more.

Another factor raising concerns about reversal is China’s negative view of Twitter, a major market for Tesla. Since 2009, China has blocked its citizens’ access to Twitter as part of public opinion control and has tried to spread its own narratives. The market speculates that the Chinese government might pressure Tesla to exert influence over Twitter. Jeff Bezos, founder of Amazon, tweeted, "Has the Chinese government gained more leverage over the ‘square’ (Twitter)? Tesla is more likely to face complications in China than Twitter censorship." Musk has described himself as an ‘absolute advocate of freedom of expression’ and cited this as a reason for acquiring Twitter, but if he does not want such a situation, he might reverse the deal.

Furthermore, after Musk announced the Twitter acquisition agreement, the European Union (EU) pressured him by stating that he must comply with regulations to crack down on illegal or harmful content, drawing attention to how future big tech regulations might affect the acquisition. The World Health Organization (WHO) also expressed concerns that false information about health or vaccines could appear on Twitter in this context.

In U.S. politics, there is discomfort over the world’s richest man Musk gaining strong control over public opinion. Chris Fultz, manager at Kelner Capital, assessed, "There are many risks lurking in the next six months until the deal is completed."

This content was produced with the assistance of AI translation services.