Elon Musk puts Twitter deal on hold due to fake accounts
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Elon Musk has tweeted that his $A64 billion cash deal for Twitter is “temporarily on hold” as he waits for the social media company to provide data on the proportion of its fake accounts, raising doubts about whether he’ll proceed with the deal.
Twitter shares initially fell more than 20 per cent in pre-market trading but after the chief executive of Tesla sent a second tweet saying he remained committed to the deal, the shares regained some ground.
The shares were down 9.6 per cent to $US40.71 in trading on Friday, a steep discount to the $US54.20 per share acquisition price.
Musk, the world’s richest person, decided to waive due diligence when he agreed to buy Twitter on April 25, in an effort to get the San Francisco-based company to accept his “best and final offer”.
This could make it harder for him to argue that Twitter somehow misled him.
Since Musk inked his deal to acquire Twitter, technology stocks have plunged amid investor concerns over inflation and a potential economic slowdown.
The spread between the offer price and the value of Twitter shares had widened in recent days, implying less than a 50 per cent chance of completion, as investors speculated the downturn would prompt Musk to walk away or seek a lower price.
“Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than five per cent of users,” Musk told his more than 92 million Twitter followers.
“To find out, my team will do a random sample of 100 followers”, Musk tweeted, inviting others to repeat the process and “see what they discover”.
“If we collectively try to figure out the bot/duplicate user percentage, we can probably crowdsource a good answer.”
Under the terms of Musk’s contract with Twitter, he is entitled to ask the company for information on its operations following the signing of the deal. But this is meant to help him prepare for his ownership of Twitter, not to carry out due diligence and reopen negotiations.
Twitter planned no immediate action against Musk, people familiar with the matter said.
The company considered the comment disparaging and a violation of the terms of their deal contract, but was encouraged by Musk subsequently tweeting he was committing to the acquisition, the sources said.
Twitter’s chief executive Parag Agrawal also weighed in, tweeting: “While I expect the deal to close, we need to be prepared for all scenarios.” On Thursday, Agrawal announced leadership changes and a hiring freeze.
Spam or fake accounts are designed to manipulate or artificially boost social media activity. Some are used to inflate a person or popularity.
The estimated number of spam accounts has held steady below five per cent since 2013, according to regulatory filings from Twitter, prompting some analysts to question why Musk was raising it now.
Musk is contractually obliged to pay Twitter a $US1 billion break-up fee if he does not complete the deal. But the contract also contains a “specific performance” clause that a judge can cite to force Musk to complete the deal.
Musk has said that if he buys Twitter he “will defeat the spam bots or die trying” and has blamed the company’s reliance on advertising for why it has let spam bots proliferate.
He has also been critical of Twitter’s moderation policy and said this week he would reverse its ban on former US president Donald Trump.
This article was first published on CommsRoom
Eliza is a content producer and editor at Public Spectrum. She is an experienced writer on topics related to the government and to the public, as well as stories that uplift and improve the community.
