Elon Musk's decision to move forward with his acquisition of Twitter Inc. came as welcome news for shareholders. The concern for industry analysts is that the deal is not a cure-all, especially given the uncertain macroeconomic environment and internal turmoil at the company.

Musk sent a letter to Twitter this week saying he intends to close his purchase of the microblogging platform under the deal's original terms, paying $54.20 per share, or $44 billion. The deal is still "pending receipt of the proceeds of the debt financing," according to an Oct. 4 SEC filing.

The news sent Twitter's shares soaring more than 22% over the course of the Oct. 4 trading day to close at $52.00 apiece. The stock has since drifted back to $49.02 per share as of press time. But as shareholders celebrated this week, equity and bond analysts warned that the deal still has a ways to go before it successfully closes. And if Musk does complete his purchase, major questions over management and revenue remain.

Scott Kessler, global sector lead for technology, media and telecommunications at Third Bridge, questioned who would serve as CEO and what other executives would be brought in to manage the company.

"What are their priorities going to be? The real key at this point is who is going to be making the decisions," Kessler said.

A new era

With or without Musk's involvement, Twitter's leadership will need to overcome a lack of long-term vision and decisiveness, Kessler said.

Twitter's 2023 goals to double its revenue and to grow its monetizable daily active users, or mDAUs, to 315 million were met with skepticism on Wall Street. In its second-quarter results, Twitter reported 196 million global mDAUs, up 17% year over year.

"It's hard to succeed when you're not hitting those engagement levels in user growth," said CFRA Research senior equity analyst Angelo Zino. "It's even harder to do it amidst a recession."

Musk's goals are even more bullish. He expects Twitter to reach $28 billion in annual revenue by 2028, up from just over $5 billion in 2021. An Oct. 4 tweet from Musk suggested that he plans to create an ecosystem similar to Meta Platforms Inc.'s triumvirate of Facebook, WhatsApp and Instagram.

"Buying Twitter is an accelerant to creating X, the everything app," Musk wrote.

Doing so would place Twitter squarely in the regulatory crosshairs of the U.S. and the EU, the latter of which has steeper fines and more stringent data privacy and AI regulations, said Patrick Hall, principal scientist at AI-focused law firm bnh.ai and professor of data ethics at The George Washington University.

Being able to attract and retain the talent required to lead Twitter will be dependent on how the regulatory landscape changes, according to Hall. "And I think it's going to change in a way that makes it harder to operate in 'go fast and break things' mode," Hall said.

Debt downturn

What Musk intends to do with Twitter may be irrelevant, however, if he does not close the deal. Judge Kathaleen McCormick of the Delaware Court of Chancery granted a brief stay in the trial between Musk and Twitter, giving the parties until Oct. 28 to close the transaction.

The trial date "is basically signaling that if they're going to resolve [the case], they need to do that before the trial starts," said Jill Fisch, a professor of business law at the University of Pennsylvania Law School.

But a turbulent debt market coupled with higher interest rates could complicate the financial picture for the banks backing Musk's acquisition, wrote Vicki Bryan of Bond Angle. The interest rate for Twitter's CCC-rated high-yield bonds was 11.75% in April, but it has since risen to almost 17%, which places those banks well into the red.

"Elon's bankers surely have reason for concern," Bryan said. "I think the banks will likely be stuck with billions in bonds few want to buy in a troubled market, issued by a soon-to-be even more dicey company taken private by one of the worst CEOs running billion-dollar companies today."

Musk's $13 billion debt financing package is being led by Morgan Stanley and also includes Bank of America Corp., Barclays PLC, BNP Paribas SA, Mizuho Financial Group Inc., Mitsubishi UFJ Financial Group Inc. and Société Générale SA. Notably, the advisory arms of three of the aforementioned companies — Morgan Stanley & Co. LLC, BofA Securities Inc. and Barclays Capital Inc. — are also advising Musk on the purchase. Advisory fees are generally only paid when a deal closes successfully.

Wedbush Securities analyst Daniel Ives expects the deal will close, despite the unfavorable debt market. He maintained his "neutral" rating and a $54.20 price target for Twitter shares in an Oct. 5 analyst note.

"The banks are essentially cemented to this Twitter debt deal, and we see no way out despite the very tough debt markets today," Ives wrote.

Uncertainty over the deal has battered Twitter's stock price in recent months. Its shares plunged nearly 40% between April 25, when Twitter's board accepted Musk's initial offer, and July 11, when Musk first filed to terminate the deal.

Shareholders who have stuck with Twitter throughout the tumultuous saga deserve credit for their patience, Kessler said.

"There was a lot of skepticism about the transaction," Kessler said. "Now we're in a position where we're talking about this deal closing."