The Ultimatum

Founder and CEO of Tesla (TSLA) Elon Musk is clearly either angling for a cheaper purchase price for Twitter (TWTR) or is ready to walk away from the deal.

Even if he does walk away from the deal, he was able to sell Tesla shares at elevated prices, then rolling the capital into Twitter shares, and that in itself is worth more than $1 billion.

If you haven’t kept up with what’s happening, Tesla shares have fallen quite substantially, about 35% to be precise, since Musk unloaded those shares.

Around 35% of the $8.5 billion in Tesla shares by Musk would amount to around $3 billion and if he is forced to pay that $1 billion walkaway fee then he would still gain $2 billion net from his antics.

He is literally playing with house money at this point.

Aside from the actual deal, the global exposure of this deal to his own brand is worth over $15 billion in itself as everyone has been zoned in on this drama because of simple palace intrigue.

The $1 billion he would pay to walk away would also drum up another tsunami of media exposure for Tesla, Space X, Starlink, and Musk.

Musk treating this as his own Johnny Depp versus Amber Heard case is stimulating the media algorithms to push his name into every corner of the global media world so who cares about the $1 billion.

In short, Musk is already a winner, and if he can parlay this bot angle into a 30% discount on Twitter then that would be some epic showmanship while living on the edge.

He would be really making his cake and eating it too.

Musk has also become highly sensitive to how the social media world operates in which usually the loudest and most frequent poster usually is heard first and clearest.

He’s taken that strategy by posting on Twitter relentlessly and often about highly controversial content just so the media talk about him.

He’s not far away from every 24-hour news cycle at this point.

The Twitter sale agreement does allow Musk to get out of the deal if Twitter causes a “material adverse effect,” defined as a change that negatively affects Twitter’s business or financial conditions.

That's one reason Musk may be focusing on the spam bot problem — though he waived many of his rights to peek under Twitter's hood when he signed the deal.

Bots are basically programs that post automated tweets but have been systematically weaponized in the era of the internet.

Musk says it’s also a problem for advertisers who take out ads on the platform based on how many real people they expect to reach.

Musk wants to be compensated by the Twitter “bot” problem with either a lower Twitter price or the opportunity to walk away for free.

If the deal doesn’t go through, there is a high chance that Twitter shareholders sue the Twitter board for going against their fiduciary duty.

While I can easily see the Twitter board suing Musk while he countersues if he decides to walk away and doesn’t pay the $1 billion termination fee.  

It would be a lawyer’s dream and a businessman can afford this if you’re the richest one in the world.

The market sensing Musk might not go through with the deal means that Tesla shares are free to rock higher and Twitter shares could sink.

Musk’s Twitter circus doesn’t affect Tesla’s real business itself.

Twitter has many internal problems along with terrible management and Musk has done everything he can to expose its hypocrisy.

If this deal completely turns sour, expect Twitter shares to tank big time, meaning like a halving.

Personally, I wouldn’t touch Twitter shares with a 10-foot pole.