Musk holds Twitter deal pending bot calculations

Elon Musk said Friday his plan to buy Twitter is “temporarily on hold,” raising fresh doubts about whether he’ll proceed with the $44-billion (U.S.) acquisition.

Musk tweeted he wanted to pinpoint the number of spam and fake accounts on the social media platform. Musk has been vocal about his desire to clean up Twitter’s problem with “spam bots” that mimic real people and appeared to question whether the company was underreporting them.

But Twitter has disclosed in regulatory filings that its bot estimates might be low for at least two years, leading some analysts to believe that Musk could be raising the issue as a reason to back out of the deal.

“Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5 per cent of users,” Musk tweeted Friday morning, indicating he’s skeptical that the number of inauthentic accounts is that low.

Musk later tweeted that he’s “still committed to acquisition.” Neither Twitter nor Musk responded Friday to requests for comment.

The problem of fake accounts on Twitter is not a secret.

In its quarterly filing with the SEC, Twitter doubted that its count of bot accounts was correct, conceding that the estimate may be low. “In making this determination, we applied significant judgment, so our estimation of false or spam accounts may not accurately represent the actual number of such accounts, and the actual number of false or spam accounts could be higher than we have estimated,” the filing says.

A review of Twitter filings with the U.S. Securities and Exchange Commission shows that the estimate of spam bot accounts and similar language expressing doubts about it have been in Twitter’s quarterly and annual reports for at least two years, well before Musk made his offer and it would have been known to him and his advisors.

Sara Silver, a professor of business journalism and financial communication at Quinnipiac University, said it appears Musk is using the number of spam accounts as a pretext to pull out of the deal.

“To claim that this is the reason that he’s putting the deal on pause, it’s not credible,” Silver said. “This is not a new issue for him. It’s not just entering his consciousness now.”

Stock in both Twitter and Tesla swung sharply in opposite directions Friday, with Twitter’s stock falling more than nine per cent and shares of Tesla, which Musk had proposed using to help fund the Twitter deal, falling nearly six per cent. But shares of Tesla, which Musk has been selling to fund some of the acquisition of Twitter, have tumbled since it was revealed the social platform had become a Musk target.

Those shares have lost a quarter of their value in the last month, and have fallen from about $1,150 in early April when Musk confirmed he had taken a huge stake in Twitter, to about $762 Friday. “So it’s become much more expensive for him to buy this company using his Tesla shares,” Silver said.

Musk’s net worth, estimated by Forbes earlier this week at $240 billion, has fallen to $223 billion as of Friday.

Tesla shares may have benefitted from Twitter bot accounts over the years as well. A University of Maryland researcher recently concluded that such bots have been used to generate hundreds of thousands of positive tweets about Tesla, potentially buoying its stock in years when it was under pressure. Neither Tesla nor its supporters has taken responsibility for those bots.