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Why Musk wants out of the Twitter deal today

Why Musk wants out of the Twitter deal today

It’s been more than two months since Elon Musk announced his intention to buy Twitter — and this changed financial markets and the world forever. Why? First of all, there’s a war in Ukraine and there are inflation worries to keep investors away from selling. Then, the Tesla company which is Musk’s main source of income and wealth announced a record for its profits. All this had an effect on Wall Street and corporations in the US, and stocks just closed out their worst start to the year. Plus, the big company proceeded to lay off its workers but this second half of the year is very uncertain for Elon Musk. Because his offer to pay $44 billion for Twitter ended up being too high and he realised that he no longer wants to continue doing this business. So, as a necessary step, Elon Musk has terminated his deal to buy Twitter, claiming that Twitter is "in material breach of multiple provisions' of the original contract. He repeatedly expressed his concerns without any real evidence that Twitter has plenty of bots and spam accounts. He said it publicly and analysts speculated that the announcement was just an excuse to break the deal he made, seeing that now Twitter was overpriced. So, at the beginning of July, Twitter shares were trading at $38.23, meaning 30% below Musk's offer price.

The truth is that Twitter shares would be going even more down if Musk hadn't made his play. Investors are leaving stocks in technology that are fast-growing and this is less interesting when interest rates are rising, but also when social media firms suffer from these changes severely. For instance, Facebook's Meta has seen its shares go down almost 50% year-to-date. The Tesla stock that he planned on relying on to finance the deal also declined lately since April, and all in all it was a major factor for Musk to break the deal ultimately. So what’s happening next? There are sources saying that there is going to be a legal battle and Twitter intends to force Musk to close this sale, since it’s been going down 5% recently and expected to drop by 30% in the near future. Related to the stock market, the Institute of International Finance said $9.1 billion in inflows to Chinese stocks in June. And new markets besides China had $19.6 billion in outflows as recession fears prevaled. If we assume that Xi's policy of eliminating Covid transmission was over, this is definitely a risky gamble. However, it was also risky to predict the government's tense relationship with the private sector.

So what happens to the Russian gas pipeline – and will it ever come back online?Since Europe hit Russia with harsh sanctions following the Russian invasion of Ukraine, there is a frightening question all around in all countries: what if Russia stops the delivery of gas in Europe? This scenario is a difficult to imagine one and almost like a nightmare ready to make damage to the whole of Europe's economy and for the rest of the world as well. But this possibility is the theme of new hand-wringing as maintenance of the Nord Stream 1 pipeline from Russia to Germany has just begun. And officials and a lot of market researchers have sincerely expressed their concerns about the probability that the gas flows will restart once the repair period has concluded.

"While this used to be a routine procedure that hardly attracted any attention, it is feared this time that Russia will not resume gas shipments afterwards," - Commerzbank.

Just in June, Germany, which is Europe's biggest economy, declared that the country was "in a gas crisis" after Gazprom (which is Russia's state gas company) dramatically reduced the flow through the Nord Stream 1 pipeline by 60%. The company has said that making this decision because of Europe’s decision to withhold vital turbines and various sanctions, but in reality, this drastic move was interpreted by many politicians as a low blow. 


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July 21, 2022
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