Tesla Inc (NASDAQ: TSLA) CEO Elon Musk is likely using the bots issue as a scapegoat to walk away from his $44 billion deal to buy Twitter Inc (NYSE: TWTR) or negotiate a lower price, according to Wedbush Securities analyst Dan Ives.
What Happened: "A changing stock market/risk environment the last month, and a number of other financing factors have caused Musk to get "cold feet" on the Twitter deal, with the bot issue not a new [one] and likely more of a scapegoat to push for a lower price," Ives wrote in a note.
"The elephant in the room for the Twitter board is Musk can walk away for a $1 billion as a small breakup fee ... and likely cite the bot/fake account issue as the reason, even though this likely would be contested by Twitter in the courts."
The Context: The development follows Musk’s comments at a Miami tech conference where he said a Twitter deal at a lower price would not be “out of the question.”
The world’s richest man last week said the agreement is currently on hold as he questioned Twitter's publicly disclosed data on the number of spam and fake accounts on its platform.
The Bots Clash: Musk on Monday estimated that fake users make up at least 20% of all Twitter accounts, likely prompting CEO Parag Agrawal to share his take on the issue.
Musk plans to take Twitter private, a platform where he has promised to return free speech and debate. The deal is expected to close later this year once shareholders and regulators give their approval.
Effect On Tesla Stock: Ives said the two scenarios — Musk lowering his price or ditching the deal — remove some of the Twitter overhangs as his selling stock fears take a rest.
The analyst maintained an "outperform" rating and a $1,400 price target on Tesla’s shares.
See Also: Elon Musk On Twitter Algorithm: 'You Are Being Manipulated' And Here's How To Fix It
Price Action: Twitter shares closed 8.8% lower at $37.39 on Monday, while Tesla's closed 5.8% lower at $724.37.
