NEW YORK: Elon Musk tweeted on Friday that his $44 billion cash deal for Twitter Inc is temporarily on hold while he waits for the social media company to provide data on the proportion of its fake accounts.
Twitter shares initially fell more than 20 per cent in premarket trading, but after Tesla CEO Musk sent a second tweet saying he remained committed to the deal they regained some ground. The stock was off 12pc in heavy volume ahead of the market open as investors fretted over the takeover.
Musk, the world’s richest person, decided to waive due diligence when he agreed to buy Twitter on April 25, in an effort to get the San Francisco-based company to accept his “best and final offer” of $54.20 per share.
Since then, technology stocks have plunged amid investor concerns over inflation and a potential economic slowdown.
The spread between the offer price and the value of Twitter shares had widened in recent days, implying less than a 50pc chance of completion, as investors speculated that the downturn would prompt Musk to walk or seek a lower price.
“Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5pc of users,” Musk told his more than 92 million Twitter followers.
Spam or fake accounts are designed to manipulate or artificially boost activity on services like Twitter. Some are tied to improve commercial results, while others are designed to create an impression that something or someone is more popular.
Twitter did not immediately respond to a request for comment. There was no immediate reaction from the investors that Musk tapped last week to raise $7.1 billion in funding.
Musk tweeted a Reuters story from ten days ago that cited the fake account figures. Twitter has said that the figures were an estimate and that the actual number may be higher.
The estimated number of spam accounts on the microblogging site has held steady below 5pc since 2013, according to regulatory filings from Twitter, prompting some analysts to question why Musk was raising it now.
“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,” said Susannah Streeter, an analyst at Hargreaves Lansdown.
Representatives for Musk did not immediately respond to requests for comment from Reuters.
Tesla’s stock, meanwhile, rose 7pc in premarket trading. The shares have lost about a quarter of their value since Musk disclosed a stake in Twitter of April 4, amid concerns he will get distracted as Tesla’s chief executive and that he may have to sell more Tesla shares to fund the deal.
There is plenty of precedent for a potential renegotiation of the price following a market downturn. Several companies repriced agreed acquisitions when the Covid-19 pandemic broke out in 2020 and delivered a global economic shock.
Published in Dawn, May 14th, 2022