Elon Musk has put his takeover of Twitter “temporarily on hold” over concerns about the number of spam and fake accounts on the social media platform, raising fresh doubt over whether the Tesla chief executive will complete the $44bn deal.
The entrepreneur announced the move in a Twitter message on Friday, sharing a link to a Reuters news story this month that suggested the number of fake accounts on the site represented less than 5 per cent of its 229mn users.
The statement immediately hit Twitter’s share price, with the stock tumbling 19.7 per cent to $36.23 in pre-market US trading. Musk then followed up with an additional tweet two hours later that he was “still committed to acquisition.”
Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of usershttps://t.co/Y2t0QMuuyn
— Elon Musk (@elonmusk) May 13, 2022
Twitter now trades at a 33 per cent discount to the $54.20 per share price Musk agreed to pay in mid-April, signalling that investors do not believe a deal will happen anywhere near that price and possibly not at all.
The doubt introduced by Musk’s tweet is the latest example of the whirlwind manner in which the transaction came together, which even led to Musk waiving his right to carry out due diligence while negotiating terms.
Twitter and Musk did not immediately respond to a request for comment.
Tesla shares, which have fallen 33 per cent since Musk tweeted that he was giving serious thought to buying the social media platform in late March, rallied nearly 6 per cent in pre-market New York trading.
It is unclear what the legal effect of his notice was. Musk has previously said one of his priorities for the platform is to “defeat the spam bots or die trying” and to authenticate human accounts.
In Twitter’s first-quarter results, the company said less than 5 per cent of its monetisable daily active users were fake or spam accounts.
“In making this determination, we applied significant judgment, so our estimation of false or spam accounts may not accurately represent the actual number of such accounts, and the actual number of false or spam accounts could be higher than we have estimated,” Twitter said in the results.
Musk’s move comes just a day after Twitter announced an immediate hiring freeze, cost-cutting measures and the departure of two senior leaders. The company has faced long-term pressure from investors over slow growth compared with rivals such as Meta and TikTok.
The billionaire’s bid to buy Twitter sent shockwaves throughout the technology and financial world, though many speculated that Musk was not serious about the deal or that he would eventually walk away. The Tesla chief agreed to pay a $1bn break fee if he abandoned the agreement.
Daniel Ives, strategist at Wedbush Securities, wrote in an analyst note: “the Street will view this deal as 1) likely falling apart, 2) Musk negotiating for a lower deal price, or 3) Musk simply walking away from the deal with a $1 billion breakup fee.”
Source: Financial Times
