Elon Musk has announced his $ 44billion acquisition of Twitter is ‘temporarily on hold’ pending details about the number of spam and bot accounts on the social media platform.
The company said earlier this month that false or spam accounts represented fewer than 5 per cent of its 229million users during the first quarter.
But Musk is now pausing his mammoth takeover demanding further information about the figures. Twitter’s board approved the purchase but it still not has been approved by shareholders, and was not expected to close for several months.
Shares of the social media company fell 25 per cent in premarket trading this morning, continuing a massive downward trend since his takeover bid was announced on April 25.
Analysts branded the move ‘farcical’, with some speculating that Musk is trying to negotiate a lower price for the deal or pull out completely, saying it was ‘straight out of the Musk playbook’.
The world’s richest man said on Twitter early Friday: ‘Twitter deal temporarily on hold pending details supporting calculation that spam / fake accounts do indeed represent less than 5% of users.’
Elon Musk ‘s $ 44billion acquisition of Twitter is temporarily on hold pending details about the number of spam and bot accounts on the social media platform
Musk is now pausing his mammoth takeover demanding further information about the figures
He linked a Reuters report from May 2 stating Twitter’s calculation that bots were only a small percentage of the site’s users.
Musk had said that one of his priorities would be to remove ‘spam bots’ from the platform.
It is not clear what the legal effect of his tweet was, and some analysts were baffled that he announced the move on Twitter rather than a regulatory filing.
Wedbush analyst Dan Ives called the tweet ‘bizarre’ and said that it ‘now sends this whole deal into a circus show with many questions and no concrete answers.’
‘Many will view this as Musk using this Twitter filing / spam accounts as a way to get out of this deal in a vastly changing market,’ Ives wrote in a note.
‘If Musk does decide to still go down the deal path a clear renegotiation is likely on the table,’ he added.
Twitter’s share price has been sinking following the April 25 announcement that Twitter’s board had agreed to his buyout, when stocks closed at $ 51.70.
Earlier this week, Twitter shares hit $ 46.75, meaning that Wall Street viewed the implied probability of a deal closing at the agreed $ 44 billion price tag as less than 50 percent.
The stock closed at $ 45.08 on Thursday and plunged in pre-market trading Friday following Musk’s tweet, dropping as much as 13 percent.
Meanwhile, Tesla shares, against which Musk has secured $ 6.25billion in funding for the acquisition, were up about 5 per cent.
Twitter did not immediately respond to a request for comment.
Susannah Streeter, an analyst at Hargreaves Lansdown, said: ‘This 5% metric has been out for some time. He clearly would have already seen it … So it may well be more part of the strategy to lower the price.
‘It’s going to be highly frustrating for many in the company given that a number of senior executives have already been laid off,’ she said.
Neil Campling, head of TMT Research in London, said: ‘Laughable. We’d always said he may cut or run or change his tune di lui at the 11th hour and 59 minutes and 59 seconds on the clock. It is farcical.
‘He has never had the full funding – we know that from his constant attempts to get financial support – but he also held all the cards.
‘And the Twitter board have been held hostage and only have themselves to blame for this mess. No other buyer will emerge-if he decides he is still interested he can name his price di lui-and it won’t be higher!
‘They (the board) should have seen this coming. There was a specific performance clause in the merger agreement (section 9.9), which gave Twitter the right to “consummate the closing (of the deal)” but only if he had the financing … which he doesn’t. ‘
Prices have been plummeting ever since Musk’s buyout deal was agreed by the tech behemoth on April 25
Michael Hewson, chief markets analyst at CMC Markets, added: ‘Obviously, the markets are reacting as if he is going to pull out of the deal, otherwise why are Twitter shares down 20 per cent. So maybe he’s (Elon Musk) paving the ground for pulling out of the deal.
‘But the timing is curious given the lengths he’d gone to to secure financing for the deal. So, maybe some share holders in SpaceX and Tesla said they want his attention di lui on his primary concerns di lui there. This is straight out of the Musk play book, keeping shareholders on their toes. ‘
The implied probability of the deal closing at the agreed price fell below 50 per cent for the first time on Tuesday, when Twitter shares dropped below $ 46.75.
This week, a US firm which bets against company share prices said Musk could submit a lower bid for Twitter due to the slump in stocks and a poor financial performance.
Short-selling firm Hindenberg Research said there is a ‘significant chance’ the entrepreneur will try to pay less than the agreed $ 54.20 per share price which was accepted by the Twitter board.
The sharp drop in the Nasdaq stock market since the deal was struck implies a far lower value for Twitter, whose value is being propped up by the takeover bid.
In a document published Monday, the company said: ‘We are supportive of Musk’s efforts to take Twitter private and see a significant chance the deal will close at a lower price.’
They added that if Musk decides to walk away, Twitter shares could fall by as much as 50 per cent.
But the SpaceX founder could have to pay $ 1 billion just to walk away from the deal in a breakup fee.
Twitter had said it faced several risks until the deal with Musk is closed, including whether advertisers would continue to spend on Twitter.
The announcement is another twist amid signs of internal turmoil over his planned buyout of Twitter, including that the social media company fired two of its top managers Thursday.
Head of consumer product Kayvon Beykpour and general manager for revenue Bruce Falck were unceremoniously axed.
Twitter Head of Consumer Product Kayvon Beykpour said that he was fired on Thursday after the company’s CEO told him ‘he wants to take the team in a different direction’
‘The truth is that this isn’t how and when I imagined leaving Twitter, and this wasn’t my decision. [CEO] Parag [Agrawal] asked me to leave after letting me know that he wants to take the team in a different direction, ‘Beykpour said.
Musk also suffered from the huge Cryptocurrency crash this week.
He is one of four so-called ‘Crypto Bros’ whose combined gigantic wealth, which for years has helped prop up the online currency market, has now taken the most colossal hit despite believing crypto would be a safe haven during the pandemic.
But more than $ 20billion has been wiped off the cryptocurrency market yesterday alone.
Tesla, which took a $ 1.5billion gamble on Bitcoin last February, has already seen that investment fall flat with its estimated value already $ 300million lower than it was 15 months ago.
Yesterday, it was also revealed the Tesla CEO’s purchase was being investigated by US regulators after he delayed reporting the buy – and thus failed to provide sufficient warning that a takeover bid was looming.
The 50-year-old’s first move towards buying Twitter was his purchase of a 9.2 percent stake in the tech company in mid February.
But he did not disclose his purchase to the Securities and Exchange Commission (SEC) until at least 10 days later, on April 4.
Any investor who crosses a 5 percent stake must file a form with the SEC within 10 days. It serves as an early sign to stakeholders that a big investor could seek to control the company.
Musk’s April 4 filing also characterized his stake as passive, meaning he did not plan to take over Twitter or influence its management or business.
The next day, however, he was offered a position on Twitter’s board, and a couple of weeks later, the world’s richest man had clinched a $ 44billion deal to buy the social media giant.
The SEC investigation was first reported on Wednesday by The Wall Street Journal.
This week, Musk has also sparked fierce debate after saying he would allow Donald Trump back on Twitter if and when he takes the reins, in line with his previous declarations that he planned to err on the side of free speech rather than bans and censorship.