Musk puts buy `on hold,' casting doubt on $44B deal

Tesla billionaire Elon Musk has put his plan to buy Twitter on what he called a temporary “hold,” raising fresh doubts about whether he'll proceed with the $44 billion acquisition.

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

But the company 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 purchase.

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

On Friday, Musk subsequently tweeted that he's “still committed to acquisition.” Neither Twitter nor Musk responded Friday to requests for comment. Musk has conducted a long flirtation with Twitter that culminated in an April deal to acquire the social platform.

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

In its quarterly filing with the U.S. Securities and Exchange Commission, Twitter itself expressed doubts 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 SEC shows that the company's estimate of spam bot accounts and similar language expressing uncertainty about it have been in Twitter's quarterly and annual reports for at least two years, well before Musk made his offer.

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 stock falling over 9% and shares of Tesla, which Musk had proposed using to help fund the Twitter deal, rising about 6%.

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.

Tesla 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 $771.41 Friday.

“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, was $232 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 have taken responsibility for those bots.

Investors assessing the deal have had to weigh Musk's legal troubles and the possibility that acquiring Twitter could be a distraction from running the world's most valuable automaker.

Musk has already sold off more than $8 billion worth of his Tesla shares to help finance the Twitter purchase.