On Friday, Elon Musk announced he was putting a hold on his $44 billion deal to purchase Twitter, causing the social media giant’s stock to drop.
“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.
Since the announcement, Twitter’s stock went down 20% in premarket trade, while Tesla rose 5%.
The billionaire tweeted a link to a Reuters piece from May 2 that quoted Twitter’s Monday filing.
The Reuters article said, “Twitter Inc estimated in a filing on Monday that false or spam accounts represented fewer than 5% of its monetizable daily active users during the first quarter.”
According to reports, it was unclear whether the bogus account problem would jeopardize the Twitter partnership. Investors had to balance legal issues for Musk, as well as the prospect that acquiring the platform would divert Musk’s attention away from running the world’s most valuable carmaker.
According to Dan Ives, an analyst at Wedbush, Wall Street investors now believe the deal has a less than 50% chance of closing. Musk’s move, he continued, is a “Twitter circus show” since Wall Street is liable to view this deal as “likely falling apart” or “Musk negotiating for a lower deal price.”
Ives believes Musk is attempting to restructure the deal’s financing so he won’t have to rely on leveraged Tesla stock. Musk could also walk away from the transaction and pay a $1 billion breakup fee instead.
“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,” he said.
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
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