Elon Musk can’t walk away from a billion dollar Twitter deal

Elon Musk can’t walk away from his deal to acquire Twitter by paying an agreed-upon breakup fee of $1 billion. It’s not that simple.

Musk tweeted on Friday that he decided to Postponing his acquisition of Twitter. While researching whether the volume of fake/spam accounts on Twitter is actually only 5%, as the company has long claimed.

He followed that up with another tweet in which he reiterated that he was still committed to the acquisition.

But he risks a lawsuit from Twitter Breaking a contract could cost the world’s richest man billions of dollars.

Musk’s reason for suspending the transaction could be similar: he might want Twitter to lower the sale price. Twitter shares fell more than 8% on Friday and are down about 23% from Musk’s agreed purchase price of $54.20 per share. Part of the decline is related to the general decline in technology stocks this month. The Nasdaq is down another 11% since the market closed on April 25 Today, Twitter accepted the Musk . show.

“This is probably a negotiating tactic on Elon’s behalf,” said Tony Sakunagi, senior research analyst at Bernstein. CNBC’s Squawk Box“The market has fallen a lot. It is possible that he is using the guise of real active users as a negotiation trick.”

Musk may feel some pressure or obligation to other potential investors in Twitter to lower the price, even if the world’s richest man is more neutral about prices.

musk Talks with outside investors For both capital and preferred financing to reduce his personal stake in Twitter. If he can get a lower price for Twitter, the returns may be higher for outside investors If and when Twitter returns to the public ownership or resale.

Although he said he’s still committed to buying Twitter, Musk may be tempted to throw in the towel given the losses he’s incurred on paper in connection with his acquisition of Twitter. Tesla Stock ownership. Tesla shares are down about 24% from last month.

If Musk believes his losses in Tesla are related to his Twitter acquisition and are large enough to overcome both the $1 billion termination fee and any additional damages that would be charged in court if he lost, he could reasonably decide to walk away from him.

But it will also have to deal with the reputational damage associated with a deal breach. It is not clear that any future company would risk selling to Musk with such a track record.

Musk could not be reached for comment.

Just as Tiffany and LVMH eventually settled, Twitter may not have many good options outside of renegotiating with Musk. The company will likely want to avoid a lengthy expensive lawsuit. Employees may flee as the company will not have a clear future plan. Twitter is already cutting costs. On Thursday, it fired two executives and said it had halted hiring.

When Twitter agreed to sell itself to Musk for $54.20, the board didn’t bother paying for a higher price. Partly because there are no other interested buyers at this price. Twitter’s board has come to the conclusion that it is unlikely that it will soon return to trading at higher levels given the lower valuation this year in peer stocks such as Facebook And Explode, Explode.

The best result on Twitter may be accepting an offer from Musk.

A Twitter spokesperson was not immediately available for comment.

WATCH: Elon Musk says he ‘remains committed’ to Twitter acquisition