Shares of Digital World Acquisition (DWAC), the special purpose acquisition company that has a deal in place to take Donald Trump's social media platform Truth Social public, are under pressure on Monday following media reports saying that Twitter (TWTR) may be close to a deal to be bought by Tesla's (TSLA) Elon Musk. 

Twitter Neal Deal to Sell Itself 

Twitter is said to be nearing a deal to sell itself to Tesla's CEO Elon Musk, Lauren Hirsch and Mike Isaac of the New York Times reported, citing two people with knowledge of the situation. Twitter's board was negotiating with Musk in the early hours of Monday over his unsolicited bid to buy the company, after he began lining up $46.5 billion in financing for the offer last week, sources told the Times.

The two sides were discussing details, including a timeline to close any potential deal and any fees that would be paid if an agreement were signed and then fell apart, they added. Obtaining commitments for the financing was a turning point for how the board viewed Musk's bid of $54.20 a share, the sources noted.

According to Reuters' Greg Roumeliotis, Twitter is close to a deal to sell itself to Musk for $54.20 per share in cash, the price that he originally offered to the social media company and what he called his "best and final" offer. Twitter may announce a $43 billion deal later once its board has met to recommend the transaction to Twitter shareholders, people familiar with the matter told the publication.

Amid the news, the status of Donald Trump's Twitter account is also in the spotlight. Twitter had banned the former President from the service on January 8, 2021, "due to the risk of further incitement of violence" following the Capitol Riots. Bloomberg's Brad Stone noted in a report that Musk said he prefers to stay out of politics, but there are good reasons to suspect a Musk-owned Twitter would reactivate the account.

Beyond saying at TED that he wants to be “very cautious with permanent bans,” the executive applauded the former president two years ago when Trump supported Tesla’s plans to reopen a California car factory during the COVID-19 lockdown. Additionally, in a few recent tweets, Musk appears to embrace the right-wing perspective on various cultural points, the author noted.

Commenting on Musk's bid to acquire the micro-blogging platform, Wedbush analyst Daniel Ives told investors that he believes the situation all changed for the Twitter board once Musk officially lined up the $46.5 billion in financing for the Twitter bid, as detailed last week.

Twitter reports earnings later this week, which likely will "not be rainbows and smiles," thus putting further pressure on the company around this game of high stakes poker with the Musk bid looming, Ives added. The analyst does not believe this Twitter bid will result in a major sale of Musk's Tesla shares, which he instead sees being used as pledged shares for the loans obtained by Musk.

Moving to the Sidelines 

Loop Capital analyst Alan Gould downgraded Twitter to Hold from Buy, with the shares having come within 5% of Musk's $54.20 per share offer and hitting his fundamental price target. A Musk takeover looks more likely, as it doesn't look like other bidders will emerge for Twitter and "there is no reason for Musk to bid against himself," Gould contended.

Meanwhile, Gordon Haskett's head of event-driven research, Don Bilson, said that with the Nasdaq 100 (QQQ) down 10% since April 1, the CEO's bid for Twitter has become more attractive. If investors were operating off the assumption that the board would demand $60 per share, $54 per share "feels about right" after the market's drop, Bilson contended.

Price Action

In Monday trading, shares of Digital World Acquisition have dropped approximately 10% to about $35.50. On the flip side, Twitter's stock has gained almost 3% to around $51.63.