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Musk’s Twitter Purchase Comes to a Screeching Halt

Elon Musk has decided that he will not buy Twitter until they come forward with how many spam accounts are on the platform. Elon Musk tweeted, “My offer was based on Twitter’s SEC filings being accurate.” The deal will still move forward as soon as Twitter is honest. Keep reading to learn more!

WASHINGTON POST: Elon Musk says deal can’t ‘move forward’ until Twitter proves bot numbers

By Faiz Siddiqui, Ellen Francis, and Taylor Telford; May 17, 2022

Elon Musk said Tuesday his $44 billion bid to buy Twitter “cannot move forward” until the social media company can prove that less than 5 percent of the platform’s users are fake.

The Tesla chief executive’s tweet comes a day after he said he might try to renegotiate a lower price and accused Twitter of potentially misleading him about the number of bots on the platform — the clearest signal yet that he could seek to exit the deal.

Twitter meanwhile filed a proxy statement Tuesday requesting shareholders approve the deal at the $54.20 a share Musk offered, saying in a news release that it was “committed to completing the transaction on the agreed price and terms.”The company has long maintained that bogus accounts amount to 5 percent of Twitter’s users, but it has acknowledged in securities filings that the true number “could be higher.”

At a conference in Miami on Monday, Musk said a lower price was not “out of the question,” the latest indication that he may be distancing himself from his initial $44 billion offer, which was announced April 25.

But if Musk can show he was misled about the number of fake accounts, it would give him the option of walking away, though legal experts have expressed doubt about the strategy. The terms of the agreement carry a $1 billion termination fee, and his withdrawal could trigger a messy legal battle, some experts have said.

The tussle over fake accounts marks the latest curveball in the quest of the world’s richest man to take the influential social media platform. Musk has more than 93.7 million Twitter followers, making him one of the site’s most popular users.

Tesla shares, a major source of Musk’s massive fortune — he is worth $213 billion by Bloomberg estimates — have dropped more than 30 percent since Musk first disclosed his minority ownership in Twitter in April, wiping roughly $300 billion off the EV maker’s market capitalization according to Dan Ives, managing director of Wedbush Securities. Musk’s personal worth is down nearly $57 billion so far this year.

The deal has heaped pressure on Tesla’s stock in a risky market environment, Ives said, and that in concert with other financing factors has “caused Musk to get cold feet.” He noted that the bot question is not new, but rather is likely “more of a scapegoat to push for a lower price.”

“The stark reality for Twitter is that no other strategic/financial bidder will come near this deal and Musk knows that,” Ives said in commentary Tuesday.

Twitter’s stock has already given up all the gains it made in light of the deal, sliding 8 percent Monday and edging lower in afternoon trading. Tesla’s shares crept up 1.8 percent.

The issue of bots — accounts that often peddle cryptocurrency scams or other schemes — prompted Musk to declare the deal on hold last week.

In a thread on Twitter’s methodology, CEO Parag Agrawal said Monday that the site suspends more than half a million spam accounts daily. He said its estimate of bots is based on reviews, conducted by people quarterly, of thousands of accounts that it counts as active and that are randomly sampled.

Musk responded to the thread with a poop emoji.

Musk said at Monday’s conference that he thought the proportion of bots is higher than what Twitter has announced.

“It’s a material adverse misstatement if they, in fact, have been vociferously claiming less than 5 percent of fake or spam accounts but in fact it is four or five times that number,” he said. “This is a big deal.”

The comments appear to refer to a contract clause that could allow him to back out in case of an occurrence that significantly changes the business.

To fund his push to take Twitter private, Musk had committed billions of dollars of his net worth, which the Bloomberg Billionaires Index estimates to be $213 billion. More recently, as the value of Tesla and other tech stocks plummeted, he sought more investors to lower his equity commitment in the deal, The Washington Post has reported.

Musk has said he wants to remove bot accounts after acquiring the company and promote “free speech” on Twitter, a view some employees worry could hurt safety policies put in place to protect users online. Musk’s plans include restoring the account of former president Donald Trump, who was banned after the Jan. 6, 2021, attack on the U.S. Capitol.

Last week, Agrawal announced a hiring freeze for Twitter and fired the company’s heads of revenue and consumer product. In a memo to employees first reported by the Verge, Agrawal, who has called himself a “lame duck CEO” amid Musk’s bid, cited a “less favorable” global economic backdrop and said the company had failed to hit “intermediate milestones” for audience and revenue goals it laid out at the pandemic’s nascency.

“And, of course, we are in the middle of an acquisition and we don’t yet know the timing of the close,” Agrawal noted in the memo. “In order to responsibly manage the organization as we sharpen our roadmaps and our work, we need to continue to be intentional about our teams, hiring and costs.”

Photo via NPR

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