's up guys and welcome back to wall street millennial on this channel and podcast. Podcast. We cover everything related to stocks and investing twitter's share price has been a wild ride over the past few months in early. April tesla techno king elon musk revealed that he purchased a 92 stake in the company shortly.

Thereafter he signed a definitive agreement to acquire the entire company for 5420 per share or 44 billion dollars. In total the share price initially surged within striking distance of the buyout price. As investors thought. There was a very high probability of the deal being closed.

But since then it has given up more than all those gains and the share price currently sits slightly below where it was before musk got involved last week. Musk officially pulled out the twitter deal with his lawyers claiming that the company had not provided adequate information about the number of fake accounts on the platform. But this deal is far from over and there's still a good chance that musk will buy the company twitter's board of directors recommended that shareholders vote in favor of the deal and intend to take legal action to force him to buy the company in fact. The prominent hedge fund.

Hindenburg research says that they've built up a significant long position in twitter. Stock. Because they think the deal will still go through in this video and podcast. We'll look at the latest developments in the twitter saga and try to handicap the likelihood of musk buying the company on april 25th elon.

Musk signed a definitive agreement to acquire twitter this means that as long as twitter does not breach the merger agreement musk is legally obligated to acquire the company at the agreed upon price the agreement specifically say that the deal is not subject to business due diligence in fact twitter. Said that this is one of the key reasons that they agreed to musk's buyout. Offer other potential buyers would likely require substantial due diligence. Which could threaten to delay the closing of the deal.

This made musk's proposal superior to other hypothetical buyers. And it was thus in the best interest of shareholders. The fact that musk signed the definitive agreement gives twitter a pretty strong case to force him to close the deal in court. Almost immediately after musk officially pulled out twitter filed a lawsuit to do just that in typical musk fashion.

The ceo of tesla responded by tweeting memes. He compared his abilities to chuck norris. While it looks. Like he has only one pawn left on the chessboard.

He still has twitter in checkmate. The main crux of his legal case is that twitter misled him about the number of bots and fake accounts on the platform and violated the merger agreement by not disclosing adequate information in their regulatory filings. Twitter says that less than five percent of monetizable daily. Active users on the platform are bots or spam.

Accounts. Musk did his own preliminary investigation which involved randomly sampling 100 accounts and manually checking whether or not they appear to be vague his approach found that over 20 of the accounts were likely fake far higher than the 5. That twitter reported. The problem is that musk's method of counting bots is almost completely.

Useless bots are not evenly distributed across twitter. So it can be very difficult to find a truly random sample. Many accounts that look like bots may in fact be real people. And finally bots often follow more accounts than regular people.

Which can skew the number of apparent bots in a random sample and finally. We don't even know what twitter considers to be a monetizable daily active user. Even if you knew for sure how many bots are on the platform. It would be impossible to prove twitter's claim wrong the problem of fake accounts on twitter has been a well known issue long before musk ever got involved in the company musk.

Himself. Said that once he takes over twitter. Reducing the spam. Accounts would be a top priority.

So it seems a bit disingenuous that he wants to pull out for this reason. Now tesla. Shareholders are worried that musk's attention may be stretched. Too.

Thin. By his twitter project. The company is facing supply chain issues. Adds.

New texas and berlin. Gigafactories and tech stocks. In general have entered into a bear market. These factors have contributed to a 35 decline in tesla's share price since the twitter deal was announced musk was able to get some outside investors involved and secure some debt financing.

But of the 44 billion purchase price 21 billion dollars will have to come directly from his pocket and even for the world's richest man 21 billion dollars is a lot of money when he first signed the deal he would have had to sell about 10 percent of his tesla stake for this today. This has increased to 14. He views tesla like it's his child selling such a large percentage of his ownership may be too tough of a pill to swallow another thing to consider is that for the past few months. Musk has been very active on social media trashing twitter.

He's basically accusing them of scamming their advertisers by showing ads to fake users if advertisers believe his claims this could have a negative impact on twitter's ability to generate revenue this puts musk in a very precarious situation as he has decreased the value of the company that he may very well be forced to buy. He's playing a high stakes poker game he hopes to pull out the deal by attacking the company's bot problem. But if his plan doesn't work he'll incur an even greater loss. If the court forces him to buy the company anyway.

So how will this all play out broadly speaking. There are three main scenarios. The first option is this ghosted court and the judge sides with musk in this scenario he may have to pay the 1 billion breakup fee. But this is peanuts compared to the 44 billion purchase price the second option is that the judge sides with twitter and forces him to buy the company for the original price of 5420 per share.

And the third scenario is that twitter doesn't want to engage in a protracted legal battle and settles with musk out of court. They could either sell it to him for a price. Less than 54 20 per share or musk could agree to pay them a breakup fee in excess of 1 billion dollars. While nobody knows exactly what will happen it's starting to look like the third option is the most likely in may musk stated publicly that negotiating a lower price is not out of the question.

Something that is much worse than they claimed and you know they say elon life's a negotiation. So at a different price it might be a totally viable deal correct. I mean that i mean. It's not out of the question um.

But i really would you know this is you know the more the more questions. I ask the more i the more my concerns grow. He doesn't want to be too open about the fact that he's trying to get a lower price. As this could be used against him in court.

So the fact that he says. It's even a possibility could be interpreted as a sign that he still wants to buy the company. So how likely are each of these scenarios currently twitter trades for 38 dollars per share. Which is almost exactly the same price as before musk got involved however during the same period.

The globalx social media etf has fallen by about 20 percent. So had it not been for the potential acquisition. Twitter. Probably also would have fallen about 20 to 30 dollars per.

Share if. Twitter succeeds in. Court the share price will be. Worth.

5420. As this is the price that musk will be forced to buy it at if they settle out of court. It's hard to say exactly what the share price will be but it will probably be somewhere near the halfway point at about 45 dollars per share based on these potential outcomes. We can back out probabilities for each one consistent with a market price of 38.

One reasonable solution is a 55 chance of musk winning in court. A 10 chance of twitter. Winning and a 35 chance of an out of court settlement. There are multiple solutions to this equation.

But any way you cut it the market is pricing in a very high probability of musk winning and a very low probability of twitter winning given how weak musk's legal case appears to be i personally think the market is giving him too much credit for full disclosure. I own a small position in twitter shares. As i think the most likely outcome is an out of court settlement at a price higher than 38 dollars. But whenever elon musk is involved it can be very difficult to predict the outcome alright guys that wraps it up for this video.

What do you think about elon musk trying to pull out of the twitter deal rs bought concerns justified or is this just a case of buyer's remorse let us know in the comments section below as always thank you so much for watching. And we'll see you in the next one wall street millennial signing out.