Elon Musk sowed new chaos in the market on Friday over his acquisition of Twitter Inc, first by announcing on the network itself that his offer was “temporarily on hold” and then stating that he “is still committed” to the deal.causing the social media giant to take a nosedive.
The billionaire initially tweeted early saying the $44 billion deal is pending until it receives more information on the proportion of fake accounts on the social media site, which sent Twitter shares down as much as 25% in premarket trading.
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
A few hours later, he sent another tweet saying that “still committed” to the deal. Shares of Twitter recovered some of their losses and were down 9.5% in afternoon trading in New York.
Still committed to acquisition
— Elon Musk (@elonmusk) May 13, 2022
Musk said he was awaiting details on a recent Twitter filing that fake accounts on the social media platform accounted for less than 5% of its users. Twitter said in its latest quarterly results “that the average number of fake or spam accounts during the first quarter of 2022 represented less than 5% of our monthly daily active users during the quarter.” Yet this data point has been a part of Twitter’s quarterly filings for nearly a decade. Twitter said it applied “significant judgment” to its latest estimate, and that the actual number could be higher.
Fighting fake accounts has been a cornerstone of Musk’s attempt to reform Twitter. In a statement announcing his agreement to buy the company last month, he revealed that he wanted to defeat spam bots, authenticate all humans and make his algorithms open source. Musk has also said that he would like to make the platform a bastion of free speech, removing the guardrails on content moderation.
Currently, bots are allowed on Twitter, although according to company policy, such accounts are supposed to indicate that they are automated. The platform even launched a tag for “good” bots, like @tinycarebot, an account that tweets self-care reminders. However, spam bots are not allowed and the company has policies in place to combat them.
Doubts about the operation
Doubts have grown in recent days that Musk can pull off his takeover of Twitter, and that the businessman might consider lowering the price of his bid for the microblogging site.. The entire transaction has been a hectic and untraditional affair, much of it taking place on Twitter. Musk went from being “just” a prolific user to disclosing a more than 9% stake in the company and then launching an unsolicited takeover offer, without detailed financial plans, in a matter of weeks. It all came together with breakneck speed in part because Musk gave up the chance to see Twitter’s finances beyond what was publicly available.
“Doubts will also be raised as to whether the fake accounts are the real reason behind this delaying tactic,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, “as promoting free speech rather than focusing on the creation of wealth seemed to be his primary motivation for acquisition. The $44 billion price tag is huge, and it may be a strategy to push back on the amount you’re willing to pay to acquire the platform.”
The proposed acquisition includes a $1 billion breakup fee for each party, which Musk will have to pay if he ends the deal or fails to deliver the acquisition funds as promised. It’s unclear whether a Twitter update on the number of fake accounts, if materially above 5%, would trigger the so-called material adverse effect clause, releasing Musk from the break fee.
The spread on the deal, which offers an indication of how far Wall Street thinks the acquisition will be completed, rose further on Thursday to $9.11 from $8.11 in the previous session. That was the widest level since the billionaire launched his offer last month to buy Twitter for $54.20, and double what it was last week when he announced a financing commitment of about $7.1 billion.
Musk’s latest tweets came just hours after news broke that Twitter was freezing hiring as part of pre-deal cost-cutting efforts. Two of Twitter’s top leaders are also leaving. Kayvon Beykpour, head of consumer products, and Bruce Falck, in charge of revenue products, have been invited by chief executive Parag Agrawal to leave the company, the two executives said in separate public postings.
The changes reflect Twitter’s current state of limbo as it awaits a new owner. Hindenburg Research LLC, an investment research firm that focuses on activist short sales, said Monday that it sees a “significant risk” that Musk’s proposed offer will come at a new lower price.
Analysts cited the ongoing slump in tech stocks, Twitter’s weak first-quarter results, including updating several years of user numbers, and the possibility that Musk will sell his 9% stake if the deal doesn’t go through. concrete.