Business

Elon Musk says $44B Twitter deal temporarily on hold, shares dive

Elon Musk said on Friday that his $44 billion deal for Twitter was “temporarily on hold,” as he tries to pinpoint the exact number of spam and fake accounts on the social media platform, another twist amid signs of internal turmoil over the proposed acquisition.

Twitter shares fell 17.7% to $37.10 in premarket trading, their lowest level since Musk disclosed his stake in the company in early April and subsequently made a “best and final” offer to take it private for $54.20 per share.

Meanwhile, Tesla shares, against which Musk has secured $6.25 billion in funding for the acquisition, were up about 5%.

Musk, who has been vocal about his desire to clean up Twitter’s problem with “spambots” that mimic real people, appeared to question whether the company was underreporting them.

“Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users,” Musk told his more than 92 million Twitter followers on Friday.

In his latest tweet, Musk referred to a Reuters story from May 2 that said Twitter had estimated that false or spam accounts represented fewer than 5% of its monetizable daily active users during the first quarter when it recorded 229 million users who were served to advertise.

“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,” Susannah Streeter, an analyst at Hargreaves Lansdown.

“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.

It wasn’t clear whether the issue could scuttle the deal. Musk has already sold off more than $8 billion worth of his Tesla shares to finance the purchase.

Wedbush analyst Dan Ives, who follows both Tesla and Twitter, said Musk’s “bizarre” tweet will lead Wall Street to either think the deal is likely falling apart, Musk is attempting to negotiate a lower deal price, or he is simply walking away from the deal with a $1 billion penalty.

“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.

He added that Musk’s use of Twitter rather than a financial filing to make the announcement was troubling and “sends this whole deal into a circus show with many questions and no concrete answers as to the path of this deal going forward.”

The implied probability of the deal closing at the agreed price fell below 50% for the first time on Tuesday, when Twitter shares dropped below $46.75.

Investors have had to weigh legal troubles for Musk, as well as the possibility that acquiring Twitter could be a distraction from running the world’s most valuable automaker.

Musk’s tweet comes a day after the social media company fired two of its top managers. Twitter said the company is pausing most hiring, except for critical roles, and is “pulling back on non-labor costs to ensure we are being responsible and efficient.”

In a memo sent to employees and confirmed by Twitter,CEO Parag Agrawal said the company has not hit growth and revenue milestones after the company began to invest “aggressively” to expand its user base and revenue.

Musk, the world’s richest man and a self-proclaimed free speech absolutist, has been critical of Twitter’s moderation policy. He has said he wants Twitter’s algorithm to prioritize tweets to be public and was against too much power on the service to corporations that advertise.

Earlier this week, he said he would reverse Twitter’s ban on former U.S. President Donald Trump when he buys the social media platform, signaling his intention to cut moderation of the site.

The social media company had said it faced several risks until the deal with Musk is closed, including whether advertisers would continue to spend on Twitter amid “potential uncertainty regarding future plans and strategy.”

Musk will have to pay a termination fee of $1 billion if he walks away from the deal.

Source
dailysabah

Leave a Reply

Your email address will not be published.

Back to top button