Elon Musk's concern about bots on Twitter is an excuse to potentially back out of the deal, Wedbush said.
Musk had agreed to buy Twitter for $44 billion but could be feeling pressure as Tesla stock falls.
"With Tesla losing ~$300 billion of market cap since the deal we view the $44 billion Twitter deal as having less than a 50% [chance] to get done," Wedbush said.
There is now a less than 50% chance that Elon Musk acquires Twitter for $44 billion, according to a Monday note from Wedbush analyst Dan Ives.
Musk, who plans to put up a big chunk of his Tesla stake to finance the Twitter buyout, raised concerns last week about the proliferation of bots on the social media platform, adding that until his concern is sorted out, the deal is on hold. Musk's abrupt concern about bots sent Twitter shares plunging 10% on Friday.
Ives views Musk's concern about bots as a "dog ate the homework" excuse that the billionaire can use to either back out of the deal or lower the price of his proposed buyout from $54.20 per share.
"Our view is while Musk is committed to the deal the massive pressure on Tesla's stock since the deal, a changing stock market/risk environment [over] the last month, and a number of other financing factors has caused Musk to get 'cold feet' on the Twitter deal with the bot issue not a new issue and likely more of a scapegoat to push for a lower price," Wedbush said.
Bots have always been a concern for Twitter, but founder and former CEO Jack Dorsey has largely cleared up much of the bot issue over the past few years, according to Ives.
But Musk's apparent pause on the deal until he is comfortable with the bot situation puts Twitter between a rock and a hard place, as no other strategic or financial bidder has stepped forward and matched Musk's proposed offer for the company.
"And Musk knows that, which is why in a changing market and with Tesla losing ~$300 billion of market cap since the deal we view the $44 billion Twitter deal as having less than a 50% [chance] to get done as of today," Ives said.
If the deal doesn't get done, Twitter would collect a $1 billion breakup fee, but that's still not going to prevent the stock from plunging to below $30, according to Ives.
"Musk is still committed to the deal per his tweets and appears like he wants to get it done, but the financing stress and equity financing overhang on his golden child Tesla has cast a long shadow on this deal," Ives explained.
Tesla stock popped more than 5% on Friday as investors likely warmed to the idea of Musk not going through with his deal to buy Twitter, which means he would be less likely to sell a big chunk of his shares.
"The bot issue at the end of the day was known by the New York City cab driver and feels more to us like the 'dog ate the homework' excuse to bail on the Twitter deal or talk down a lower price," Ives concluded.