Elon Musk tweeted Friday that his $44 billion cash deal for Twitter Inc was “temporarily on hold” while he waited for the social media company to provide data on the proportion of his fake accounts.
Twitter shares initially fell more than 20% in premarket trading, but after Musk, the chief executive of electric car market Tesla Inc., sent a second tweet saying he was committed to the deal, he gained some ground.
Shares fell 9.6% to $40.71 in trading Friday, a steep discount to the $54.20 acquisition price per share.
Musk, the world’s richest man, decided to waive due diligence, in an effort to make the San Francisco-based company accept his “best and final offer” when he agreed to buy Twitter on April 25. This may make it difficult for them to argue that Twitter has misled them in some way.
As Musk struck his deal to acquire Twitter, technology stocks have tumbled 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, meaning less than 50% is likely to be completed, as investors speculated that the downturn could push Musk away or undercut. Will inspire you to explore.
“The Twitter deal temporarily pending details supports the calculation that spam/fake accounts actually represent less than 5% 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 at https://twitter.com/elonmusk/status/1525291586669531137, inviting others to repeat the process and ” See what they find.”
“If we try to collectively detect bot/duplicate user percentages, we can probably crowdsource a good answer.”
Musk tweeted that he “trusted the accuracy of Twitter’s public filing” in response to a follower who asked why he hadn’t thought about it before offering to buy the company.
Under the terms of Musk’s contract with Twitter, he is entitled to ask the company for information about its operations after signing the deal.
But it’s meant to help prepare him for his ownership of Twitter, not to do the due diligence and reopen the conversation.
Twitter is not planning immediate action against Musk as a result of Musk’s remarks, people familiar with the matter said.
Sources said the company deemed the remarks offensive and a violation of the terms of their deal, but Musk later tweeted encouragingly that he remained committed to the acquisition.
A Twitter spokesperson said Musk had come to Twitter’s office on May 6 for a meeting as part of the transaction planning process.
Twitter CEO Parag Agarwal also tweeted, “While I expect the deal to close, we need to be prepared for all scenarios.” On Thursday, Agarwal announced a leadership change and a hiring freeze.
real or fake?
Spam or fake accounts are designed to manipulate or artificially promote activity on services such as Twitter. Some people have the impression that something or someone is more popular than they really are.
Musk tweeted a Reuters story ten days ago that cited figures from the fake account. Twitter has said the figures were an estimate and the actual number could be higher.
According to regulatory filings from Twitter, the estimated number of spam accounts on the microblogging site has held steady at below 5% since 2013, prompting some analysts to question why Musk was raising it now.
“This 5% metric has been out for a while. He must have clearly seen it already… so it may be more part of a price reduction strategy,” said Susannah Streeter, an analyst at Hargreaves Lansdowne. Told.
Representatives for Musk did not immediately respond to requests for comment from Reuters.
Tesla’s stock gained 5% on Friday. The shares have lost nearly a quarter of their value since Musk disclosed a stake in Twitter on April 4, amid concerns he would deviate as Tesla CEO and that he would be forced to join Tesla to fund the deal. May have to sell more shares.
There are plenty of precedents for a possible re-negotiation of price after a market downturn. When the COVID-19 pandemic broke out in 2020 and caused a global economic shock, several companies agreed to take over.
For example, French retailer LVMH threatened to walk away from a deal with Tiffany & Co. The US jewelry retailer agreed to reduce the price from $425 million to $15.8 billion.
Sometimes acquirers seeking to exit turn to “material adverse effects” clauses in their merger agreements, arguing that the target company has suffered substantial losses.
But the language in the Twitter deal agreement, as in many recent mergers, doesn’t allow Musk to get away with a deteriorating business environment, such as a drop in advertising demand or a drop in Twitter shares.
Musk is contractually obligated to pay Twitter a $1 billion break-up fee if he does not complete the deal. But the contract also includes a “distinctive performance” clause that a judge can cite to compel Musk to complete the deal.
In practice, acquirers who lose a specific performance case are almost never forced to complete an acquisition and usually negotiate a monetary settlement with their targets.
beat the bots
Musk has said that if he buys Twitter he will “beat spam bots or die trying” and has blamed the company’s reliance on advertising as why it has allowed spam bots to thrive.
He has also been critical of Twitter’s moderation policy, saying he wants Twitter’s algorithms to prioritize making tweets public.
This week, Musk said he would reverse Twitter’s ban on former US President Donald Trump when he buys the social media platform, indicating his intention to cut moderation.
Trump, who started a rival social media app called Truth Social, took to his platform on Friday to weigh in.
“There’s no way Elon Musk is going to buy Twitter at such a ridiculous price, especially since it feels like it’s a company heavily based on bots or spam accounts,” Trump wrote in a post. He said his site is much better.
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(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
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