Musk’s Twitter takeover ‘on hold’ over tally of fake accounts
Elon Musk has said his $44bn (£36bn) takeover of Twitter is “temporarily on hold” in a tweet that rocked the company’s share price and cast doubt on whether the deal will happen.
The Tesla chief tweeted yesterday morning that the deal was being frozen while he awaited details supporting Twitter’s assertion that fewer than 5% of its users were spam or fake accounts. In a subsequent tweet, Musk said he was “still committed to acquisition”, amid speculation that the world’s richest man was about to walk away from the deal or seek a lower price.
Musk and Twitter have signed an agreement that includes a $1bn break fee payable by the Tesla CEO if he walks away, although it also includes a “specific performance clause” that a judge can cite to force Musk to complete the deal at the agreed price of $54.20 per share.
“I suspect he wants to use the threat (legally weak) that the disclosure about bots on the platform results in a failure of a Twitter representation (it doesn’t) and then push for a renegotiation,” said Brian Quinn, an associate professor at Boston College Law School.
“That’s hardly an original thought and this is not an uncommon strategy. If the Twitter board has a spine it will just say no and sit on its rights under the agreement.”
The move comes a day after Twitter announced the departure of two top figures at the company in an internal shake-up. The Musk takeover plan has prompted a backlash among both Twitter users and staff.
Musk announced the hold on the Twitter takeover alongside a link to a Reuters article published on 2 May that referred to a filing with the US financial regulator, in which Twitter claimed that false or spam accounts represented fewer than 5% of its 229 million daily average users. The filing does not appear to contain new information on spam accounts, however, with previous quarterly filings going back to 2014 also referring to the “fewer than 5%” figure, albeit with the caveat that the true number could be higher.
Meanwhile, the Tesla CEO has been looking for additional investors to support the deal, the Washington Post reported, as Tesla’s stock price has weakened.
Musk’s Tesla stake is a key component in his financing of the deal, with fears that he will sell or pledge more of them contributing to pressure on the share price. Tesla shares have lost a quarter of their value in the last month falling from about $1,150 in early April when Musk confirmed he had taken a huge stake in Twitter, to $769.59 yesterday.
Musk has already secured more than $7bn (£5.7bn) in outside funding from a group of investors that includes the tech tycoon Larry Ellison, a Saudi prince, the Qatar state investment fund and the world’s biggest cryptocurrency exchange. Musk’s net worth, estimated by Forbes earlier this week at $240bn, was $232bn yesterday.
The news sent Twitter’s shares down nearly 10% to $40.71 when Wall Street closed, on concerns that the deal could collapse.
“Musk will probably be legally bound to either follow through with the deal or pay the fee,” said Art Hogan, the chief market strategist at National Securities.