Elon Musk has tweeted that his planned $44B takeover of Twitter is on hold, temporarily. In a tweet, Musk, the world’s richest person and prolific user of Twitter, says the deal is on hold pending details on spam and fake accounts.
“Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users,” Musk said in a tweet.
The tweet from Musk has disrupted Twitter with the micro-blogging platform falling 20 per cent in premarket trading. The tweet also further intensifies this question of whether Musk will really go ahead with his plan to take Twitter private despite having access to financing and Twitter’s board approval.
Elon Musk confirms Twitter deal is on temporary hold
When Musk first announced his intention to take Twitter private in a $43B deal, which he called his “best and final offer”, there was apprehension around his intent. A number of analysts believed that Musk is simply using the platform to boost his own popularity and won’t go ahead with his plan.
However, the eccentric chief executive of Tesla Inc, showed his intent to go ahead with the deal by filing with the SEC his plan to finance the deal. The financing option forced Twitter to consider his offer and the board eventually agreed to accept his offer. However, the agreement between Elon Musk and the Twitter board was just the first step.
There was always the possibility that Musk might walk away from the deal but his recent actions did suggest he will go through with this deal, until now. On Friday, Musk said he is putting the deal for Twitter temporarily on hold. He cites the pending details on spam and fake accounts as reasons for his decision.
Twitter has a spam and fake accounts problem
Twitter has a spam and fake accounts problem and it is something that is known. The social media platform quantified that problem during a filing earlier this month. The company said fewer than 5 per cent of its monetizable daily active users were represented by false or spam accounts.
During the first quarter of this year, the social media company served ads to 229 million users. The disclosure from Twitter came after Musk publicly said that one of his priorities after taking the social media company private would be to remove “spam bots” from the platform.
Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of usershttps://t.co/Y2t0QMuuyn— Elon Musk (@elonmusk) May 13, 2022
Musk being Musk, also acknowledged that he has personally benefited from spam accounts that follow him on the service. He also announced his intent to authenticate all humans on the platform and open source Twitter’s algorithms.
Elon Musk putting the deal temporarily on hold is not surprising but him citing pending details on spam accounts raises concerns. Twitter allows bots provided those accounts indicate it is automated but restricts spam bots from its platform.
In its filing, Twitter also said it faced several risks until the deal with Musk is closed and one of the biggest being whether advertisers will continue to spend on its platform. With his early morning shocker, Musk is certainly making Twitter more volatile. Musk has not explained what kind of details he is looking to receive from Twitter on spam or fake accounts.
Will Musk walk away from the Twitter deal?
This question was being asked even after Musk managed to secure the financing required to take Twitter private. In his initial filing, Elon Musk planned to fund this acquisition by raising $46B, with $21B in the form of equity financing and another $25.5B in the form of debt financing through Morgan Stanley Senior Funding and other firms.
Last week, he revealed that he has raised $7B in fresh capital for his Twitter buyout, which reduced the value of his loan against Tesla stock. The doubts around his ability to pull off this deal have only grown in the recent days. The tweet today from Musk could become the first sign of his disinterest in the deal.
If the deal does not go through and Musk terminates it, then he has to pay $1B. But with an estimated net worth of $215B, Musk can easily pay the termination fee and move on. Musk has clarified that he is “still committed to acquisition.”
Meanwhile, Twitter has announced a hiring freeze and other cost-cutting efforts. Twitter’s product chief Kayvon Beykpour has left the company at the request of CEO Parag Agrawal.