Musk puts Twitter buy ‘on hold,’ casting doubt on US$44B deal

DETROIT

Tesla billionaire Elon Musk placed his plan to purchase Twitter on what he called “a temporary hold,” raising new doubts about whether or not he will pursue the US$44 billion acquisition.

Musk tweeted early FridayThat he wanted to identify the source of fake accounts and spam on the social networking site. He was vocal about his desire for Twitter to fix its problem with “spambots”, which imitate real people. And he seemed to be questioning whether Twitter was underreporting these accounts.

The company has however disclosed in regulatory filings its bot estimates may be low for at minimum two years. This leads some analysts to speculate that Musk might be raising this issue to halt the purchase.

Musk tweeted Friday morning: “Twitter deal temporarily suspended pending details supporting calculation spam/fake account do indeed represent less than 5 percent of users,” indicating that he doubts that there are that many inauthentic accounts.

Musk tweeted on Friday that he was “still committed” to acquisitions. Twitter and Musk didn’t respond to our requests for comment on Friday. Musk and Twitter have been in a long-running flirtation that ended with an April deal to purchase the social network.

It is no secret that fake Twitter accounts are a serious problem.

Twitter expressed doubts about its estimate of bot accounts in its quarterly filing to the U.S Securities and Exchange Commission. It also acknowledged that it may have underestimated the number. According to the filing, Twitter stated that it used significant judgment in making the determination of fake or spam accounts. This means that the estimate of bot accounts might not be accurate and the real number could be higher than what we have estimated.

Review of Twitter filings to the SEC reveals that the company’s estimate for spam bot accounts and similar language expressing doubt about it were in Twitter’s quarterly- and annual reports for at minimum two years before Musk offered.

Sara Silver, Quinnipiac University’s professor of financial communication, business journalism, and finance, saidMusk appears to be using spam accounts as an excuse to cancel the deal.

Silver said, “To claim that he’s doing this is not credible. said. He knows that this isn’t a new problem. It’s not something that is just in his mind now.

Stocks in Tesla and Twitter fell sharply Friday. Tesla stock dropped 9.7% while Tesla shares rose 5.7%. Musk proposed that Tesla stocks be used to finance the Twitter deal.

Tesla shares have plunged since Musk announced that Tesla was the target of Musk’s acquisition of Twitter.

Tesla shares have lost 25% in value in the past month. They were worth US$1,150 when Musk first announced that he had purchased a large stake at Twitter in April. Now they are worth $769.59 Friday.

Silver said that “it’s becoming much more expensive for him buy this company using his Tesla Shares.” said.

Forbes estimated Musk’s net worth at $232 billion on Friday, as reported by Forbes earlier in the week.

In 2017, academic researchers attempted to count all active accounts in English on Twitter. They found that as many as 15% of them were bots. Emilio Ferrara, an assistant professor at the University of Southern California, was the researcher. saidTwitter reported Friday that they have become better at deleting spam accounts. But, new accounts are being added all the time.

He said, “It is really difficult to pinpoint the figure overall.” said. It’s impossible to estimate the entire userbase unless you are Twitter.

Twitter bot accounts may have helped Tesla share prices over the years. Recently, a University of Maryland researcher concluded that such bots could have generated hundreds of thousands of positive tweets regarding Tesla, potentially buoying its stock over years of being under pressure.

Tesla, its supporters, and the bots were not their fault.

The deal was evaluated by investors who had to consider Musk’s legal problems and the possibility of Twitter becoming a distraction from the running of the most valuable automaker in the world.

Musk has already sold over US$8 billion of Tesla shares in order to finance the Twitter purchase.

Musk originally had pledged to borrow US$12.5billion with Tesla stock as collateral. Musk would then borrow US$13Billion more from banks, and would also put up $21Billion in Tesla shares. These Tesla shares would be given to banks as cash in exchange for the closing of the deal.

Musk made commitments to investors of more than US$7Billion last week. This would allow him to reduce the number Tesla shares he would need as collateral.

Dan Ives from Wedbush, who is a Twitter and Tesla fan, called Musk’s tweet “bizarre”. saidWall Street is skeptical. Ives said, “The street view says he’s trying find an excuse to basically walk or talk down the deal prices.” said.

Musk may have to pay US$1billion if the deal is not completed.

Musk’s choice to use Twitter instead of a financial filing for the announcement was troubling.

Musk could have problems if he uses Twitter to announce a major event that affects the share price of two companies. Musk must obtain approval from a Tesla lawyer prior to tweeting any information that could affect the company’s share prices. This is in accordance with a 2018 settlement regarding securities fraud. Musk’s tweet on Friday at 5:44 a.m. ET announcing the suspension was not authorized by the SEC.

Already, the SEC has subpoenaed Tesla and Musk for a tweet last fall that asked followers if they should sell Tesla stock. According to court documents, Musk did not receive the pre-approval required.

Musk tried to rescind the settlement, but a New York federal judge rejected it. He claimed that Musk signed it under duress and that it violated his right to free speech. The Musk subpoena was also accepted by the judge.

Musk had signed an October 2018 agreement to the SEC. This led to the dispute. Musk and Tesla agreed to each pay US$20million in civil penalties over Musk’s tweets claiming that he had the “funding secured” for Tesla to go private at $420 per shares. Tesla is still a public company, though the funding wasn’t secured.

Twitter fired two top managers on Thursday. Twitter saidThe company is halting all new hiring except for critical positions and “pulling down on non-labor costs to ensure that we’re being responsible and efficient.”

Parag Agrawal, CEO of Parag Agrawal, confirmed this in a memo that was sent to employees. saidThe company has yet to achieve its revenue and growth milestones since it began to invest aggressively to increase its user base and revenue.

Chan reported from London. This report was co-authored by Matt O’Brien in Providence and Michelle Chapman (New York).