Twitter Inc. shares tumbled in premarket trading, falling further below Elon Musk’s offer price, on concern the deal may come under government scrutiny.
(Bloomberg) — Twitter Inc.
shares tumbled in premarket trading, falling further below Elon Musk’s offer price, on concern the deal may come under government scrutiny.
The stock fell as much as 16% to $43.91, before paring declines, after Bloomberg News reported that the Biden administration is mulling whether the US should subject some of the billionaire’s ventures, including the deal for the social media company, to national security reviews.
Some US officials may be concerned about foreign investors backing Musk’s bid, including Prince Alwaleed bin Talal of Saudi Arabia, Binance Holdings Ltd.
— a digital-asset exchange founded and run by a Chinese native — and Qatar’s sovereign wealth fund, Tradition event-driven analyst Gregory Lafitte said in written comments.
If the Committee on Foreign Investment in the United States, known as CFIUS, starts a national-security review it would delay the deal, which likely wouldn’t close before the end of this year, Lafitte added.
Twitter had inched closer to Musk’s $54.20 a share offer price before the report, with Wall Street appearing increasingly confident that the deal would close.
On Thursday, the arbitrage spread on the proposed takeover was at its narrowest since the deal was announced.
Both sides’ bankers and lawyers are preparing paperwork for the buyout to be completed by the Oct.
28 court-issued deadline, according to people familiar with the matter.
Some are less worried about a review. “It does seem fanciful that the U.S. Government would view Twitter as a national security asset,” Canaccord Genuity’s Quest analyst Graham Simpson said in an email.
Still, “the jury is still out” on the deal because of questions about Musk’s ability to finance the deal after Tesla Inc.’s share price halved this year, he said.
If premarket losses hold, Twitter will snap its six-day streak of gains.
Also weighing on social media stocks on Friday, Snap Inc. reported its slowest quarterly sales growth ever, saying a decline in advertising spending continues to drag on results.
(Adds analyst comments.)
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