Elon Musk says Twitter deal is on hold, putting bid on shaky ground

SAN FRANCISCO – Elon Musk tweeted early Friday that his bid to buy Twitter was temporarily on hold, opening up a potential door for renegotiation and raising uncertainty about his push to take the social media site private.

His declaration cast fresh doubt on the seriousness of his offer just as he was scrambling to find new investors to help him fund the deal. It also played into his hand by sending Twitter’s stock price tumbling, though the tweet had the potential to draw regulatory scrutiny.

“Twitter deal temporarily on hold pending details supporting calculation that spam/ accounts do indeed represent less than 5% of users,” Musk tweeted, linking to a Reuters article last week citing a Twitter filing. Roughly two hours later, he added, “Still committed to acquisition.”

Spam bots, accounts that peddle cryptocurrency scams and otherwise seek to exploit vulnerable users, have long been a pet peeve of the technology mogul who regularly encounters impersonators in his activity on the site.

But his public declaration was an unusual and unexpected maneuver at this stage of the negotiations, according to financial experts and people familiar with the negotiations who spoke on the condition of anonymity to discuss sensitive matters. The deal was expected to close in the next three to six months, but the tweets Friday could represent an effort by Musk to return to the negotiation table to buy Twitter for less than previously agreed upon.

It also sent Tesla’s stock price – – which had declined steeply this year – – upward while Twitter’s stumbled. Musk owns a major stake in Tesla and had committed billions of dollars of his personal wealth toward funding the deal. The increase in prices Friday allowed Musk to recoup some of his net worth, while also reducing the market value of the company he is seeking to buy.

Twitter shares fell by nearly 10% Friday, while Tesla shares rose nearly 6%. Investors in the electric automaker, led by Musk, have been concerned about the billionaire leveraging his stake to fund the Twitter deal.

Musk’s cold feet over the concern that there might be more spam bots than he thought may represent an attempt to trigger a clause in the contract that allows the deal to be called off if an unforeseen event significantly hurts Twitter’s long term business prospects, according to legal experts and people close to the deal who requested anonymity because they are not authorized to speak publicly.

Still, at least one person familiar with the negotiations cast doubt on the impact of Musk’s strategy.

“We haven’t seen one iota of evidence of that the deal is on hold,” said the person, who spoke on the condition of anonymity to describe the discussions. “Things continue today just as they were yesterday.” Bots would be a “routine” subject of discussion for such a deal, the person said.

Urska Velikonja, a law professor at Georgetown University, said of the Musk-Twitter saga: “Anyone trying to predict how this ends up is a fool.”

Musk and Twitter did not comment for this story.

Twitter continued to spiral into further management chaos this week, with CEO Parag Agrawal firing two top deputies and announcing a hiring freeze. On Friday Agrawal tweeted that he needed to start cost-cutting right-away because of the macroeconomic environment. “I won’t use the deal as an excuse to avoid making important decisions for the health of the company, nor will any leader at Twitter,” he said.

Musk’s statement that the deal was on hold had the potential to draw the eye of securities regulators, who would examine whether his public declarations about the deal while in active pursuit of the company ran afoul of securities laws.

Musk is prone to brash statements on Twitter, where he has more than 90 million followers, something that has drawn scrutiny from the Securities and Exchange Commission. The terms of the deal require a $1 billion breakup fee, though his tweet left some pondering whether he was seeking to circumvent that cost. And securities law experts said Musk backing out at this stage could resulted in a protracted and messy legal battle, leaving the tech mogul incurring costs well over the penalty for walking away.