Dhe entrepreneur Elon Musk has temporarily suspended his deal to buy Twitter. Musk wrote on Twitter that he first wanted to wait for calculations to show that accounts without real users actually account for less than five percent. The online service published this estimate a few days ago in its detailed quarterly report.
Twitter’s stock price quickly fell nearly a quarter in premarket trading following Musk’s tweet, trading at levels around $34.50. The price later recovered somewhat to around $38. That’s a far cry from the $54.20 a share Musk had promised shareholders. The paper went out of business on Thursday at $45.08 – a sign of investor skepticism that Musk is actually going through with the deal. Musk, in turn, briefly assured his first tweet in another message that he was still interested in taking over Twitter.
Problem with fake accounts
The short message service named the number of 229 million users for the first quarter that it can reach with its ads. The service does not count clearly identified fake accounts in the user numbers. However, Twitter recently had to admit that slightly inflated user numbers have been reported since 2019 due to an error. However, the deviations were rather small with a maximum of almost two million users.
It shouldn’t have come as a surprise to Musk that there are also fake accounts on the platform. Because he had declared as one of his goals for the Twitter purchase that he wanted to ban profiles that are used to send spam messages from the platform.
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For detailed view
It’s unclear whether Musk could use the accusation that Twitter provided inaccurate information about the number of fake accounts to exit the deal or lower his bid. After all, he had waived the usual pre-agreement review of the Twitter books.
Twitter and Musk both agreed to a $1 billion fine if either side canceled the deal. But experts didn’t think that meant Musk could just change his mind without explanation and be off the hook with a billion dollars.
The boss of the electric car manufacturer Tesla had agreed with the Twitter board of directors on a deal worth around 44 billion dollars. But he is still dependent on enough shareholders wanting to sell him their shares. Twitter and Musk previously wanted to complete the acquisition by the end of the year. In the past few months, he has already bought a good nine percent stake in Twitter on the stock exchange.
In the past few days, other problems for the deal have also become apparent. Musk originally wanted to borrow around $12 billion of the purchase price, which would be secured with his Tesla shares. But after Tesla stock plummeted from around $1,000 to just $728 on Thursday, that plan became increasingly unfavorable to him. Financial service Bloomberg reported on Thursday that Musk is looking for alternative sources of funding instead of the equity-backed loan. Tesla shares surged towards the $770 mark in premarket trading following Musk’s tweet.
Musk’s announcement also sheds new light on radical moves by Twitter CEO Parag Agrawal on Thursday. He had pushed out the person responsible for the product and the top manager responsible for sales development and imposed a hiring freeze.