Monday, May 20, 2024

Musk hits the brakes on Twitter deal

Elon Musk has said his $44-billion deal to buy Twitter is on hold after he queried the number of fake or spam accounts on the social media platform.

He said he was waiting for information “supporting [the] calculation that spam/fake accounts do indeed represent less than 5% of users.”

Musk has been vocal on cleaning up spam accounts. However, analysts speculated he could be seeking to renegotiate the price or even walk away from the takeover.

Musk added later that he was “still committed to acquisition,” but the disclosures fuelled Wall Street doubts, sending Twitter’s share price plunging.

Shares were down 10% in morning trade in New York. Even before Musk’s comments, the stock had been selling for less than the $54.40 he had offered, a sign that the markets may not be convinced he would complete the buyout.

Under the terms of the deal, if either Twitter or Musk walk away, they must pay the other side a termination fee of $1 billion.

Twitter reported more than two weeks ago that fake accounts accounted for fewer than 5% of its daily active users during the first three months of this year.

However, the company said in determining the amount of spam accounts, “it applied significant judgment, so our estimation of false or spam accounts may not accurately represent the actual number of such accounts.”

“The actual number of false or spam accounts could be higher than we have estimated. We are continually seeking to improve our ability to estimate the total number of spam accounts,” it said.

Musk, who is the richest person in the world according to Forbes magazine, is examining that figure.

Twitter has long had an issue with automated, fake accounts being used to relentlessly post content.

Musk has called for “defeating the spam bots” on Twitter as well as several other changes, including bringing back some banned accounts such as that of former U.S. President Donald Trump.

Dan Ives, a tech analyst at investment firm Wedbush Securities, said Musk’s tweet would “send this Twitter circus show into a Friday the 13th horror show.”

He said Wall Street would now “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 break-up fee.”

Ives said if Mr Musk did still decide to go ahead with the deal, a “clear renegotiation is likely on the table.”

He added many would view him highlighting the number of spam accounts “as a way to get out of this deal in a vastly changing market.”

“The nature of Musk creating so much uncertainty in a tweet (and not a filing) is very troubling to us… and now sends this whole deal into a circus show with many questions and no concrete answers as to the path of this deal going forward.”

 

https://www.bbc.com/news/business-61433724

 

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