Five teams remain in the running to sign free-agent swingman Matt Barnes, according to sources with knowledge of Barnes' thinking.
One source close to process said early Wednesday that Barnes continues to weigh interest from the Raptors along with the Cleveland Cavaliers and three title contenders he has been negotiating with since last week: the Miami Heat, Boston Celtics and Los Angeles Lakers.
One of the most coveted free agents left on the open market, Barnes announced Monday night via his Twitter feed that he was headed to Toronto.
But that deal quickly unraveled when it became apparent that the limited sign-and-trade options available to Orlando -- Barnes' last team -- would not allow for the contract that Barnes was anticipating.
"It's something we've discussed and talked about," Magic general manager Otis Smith told the Orlando Sentinel on Tuesday when asked about the sign-and-trade talks with Toronto.
"At this point nothing has happened," Smith continued, "and I don't really anticipate anything happening."
Under the impression that he would be receiving a two-year contract worth roughly $9 million, Barnes tweeted his thanks to Magic fans after announcing that he'd be "playing for the Toronto Raptors" next season.
The Raptors have not abandoned their pursuit and remain determined to sign the defensive specialist, sources said, but that would require Barnes to accept lesser terms than he expected. Since Toronto recently spent the bulk of its $5.8 million mid-level exception to sign Linas Kleiza, it doesn't have the available funds to sign Barnes outright to a deal that starts in the neighborhood of $4 million.
"We are out there aggressively stoking the fire and unfortunately we ran into some difficulty getting this done," Raptors president of basketball operations Bryan Colangelo told the Toronto Star. "We remain interested in acquiring Matt, but other teams are now in the mix."
Barnes' other option is turning to one of the other teams that have been steadily chasing him, but only Cleveland has the financial flexibility to offer an annual salary in that range.
The Magic are prevented by salary-cap rules from starting a sign-and-trade deal for Barnes at higher than $1.9 million, because Orlando doesn't have Barnes' full Bird rights after employing him for only one season. A sign-and-trade deal would also have to span at least three years, although only the first year is required to be guaranteed.
Barnes was initially believed to be on the verge of signing with a title contender late last week -- such as the Heat, Celtics or Lakers -- when the Raptors made an aggressive late rush to join the bidding. He also gave serious consideration in recent days to the Cavaliers before talks with Toronto got serious.
Barnes started 58 games last year for Orlando in his only season with the Magic after a hard recruiting push from center Dwight Howard, averaging 8.8 points and 5.5 rebounds per game. The 30-year-old originally signed a two-year deal with Orlando but exercised his option to become a free agent after playing for $1.6 million in 2009-10.
With salary-cap rules limiting the raise the Magic could offer unless it cut into its own mid-level exception, Smith said last week that matching Chicago's offer sheet to sharpshooter J.J. Redick and signing Quentin Richardson were budget priorities.
If Toronto does not become Barnes' eighth stop in a career that began with the Los Angeles Clippers in 2003, it will be the second high-profile deal that has collapsed unexpectedly at the Raptors' expense this offseason.
Earlier this month, Charlotte agreed to participate in a trade originally hatched by Toronto and the Phoenix Suns, which would have brought Tyson Chandler and Boris Diaw to the Raptors. But the Bobcats pulled out and traded Chandler to Dallas one day later.
Marc Stein is a senior NBA writer for ESPN.com.