Twitter Inc (NYSE:TWTR) shares were trading higher Tuesday after the Twitter board voted unanimously to approve the sale of the company to Tesla Inc (NASDAQ:TSLA) CEO and world's wealthiest person Elon Musk.
What Happened? A new Twitter filing with the U.S. Securities and Exchange Commission Tuesday revealed Twitter's board of directors all approve of Musk's proposed $44-billion buyout of Twitter.
The market remains unconvinced the buyout deal will go through in its current form: Twitter shares are still trading at around $38, roughly a 30% discount to Musk's offer price of $54.20 per share.
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Why It's Important: Musk first announced his buyout bid on April 24, and the Twitter board accepted the offer just a day later. The filing on Tuesday represents the official acceptance of the offer, but the deal still has several hurdles to clear.
In recent weeks, Musk has threatened to back out of the deal over uncertainty surrounding the number of fake accounts on Twitter. Ironically, researchers have found Tesla is likely one of the biggest beneficiaries of so-called Twitter "fanbots."
A University of Maryland study found 23% of all tweets using the hashtag #TSLA from 2010 to 2020 came from accounts that had a high likelihood of being bots.
Musk has recently said he estimates as much as 20% of Twitter's 229 million users are spambots, while Twitter insists that number is closer to 5%.
Musk also faces hurdles in financing the Twitter buyout. Forbes lists Musk's net worth at $228.5 billion, but the majority of that worth is tied up in Tesla stock.
Finally, Musk's buyout must be approved by Twitter shareholders, who will vote on the deal in late July or early August.
Benzinga's Take: Musk faces a potential $1-billion breakup fee and the possibility of shareholder lawsuits if he backs out of the deal at this point.
Yet the fact that Twitter shares are trading at a nearly 30% discount to the buyout price suggests Musk's reputation for not delivering on his ambitious claims has Wall Street skeptical he will ultimately follow through with the Twitter acquisition in its current form.
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