Musk says $44 billion Twitter the transaction was suspended due to false account data

Musk says $44 billion Twitter the transaction was suspended due to false account data

“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. “To find out, my team will do a random sample of 100 followers” of the microblogging site,  , inviting others to repeat the process and “see what they discover.” “If we collectively try to figure out the bot/duplicate user percentage, we can probably crowdsource a good answer.” Musk tweeted he had “relied upon the accuracy of Twitter’s public filings” in reply to a follower who asked why he had not thought of this before offering to buy the company. Under the terms of Musk’s contract with Twitter, he is entitled to ask the company for information on its operations following the signing of the deal. But this is meant to help him prepare for his ownership of Twitter, not to carry out due diligence and reopen negotiations.

Elon Musk said on Friday that his $44 billion cash purchase for Twitter Inc is “temporarily on pause” while he waits for evidence on the amount of fraudulent accounts on the social media platform. In premarket trade, Twitter shares plunged more than 20%, although they recovered some ground after Musk, the CEO of electric car maker Tesla Inc, published a second tweet suggesting he was still committed to the acquisition. The stock dropped 9.6% to $40.71 in Friday trading, a significant discount to the $54.20 per share purchase price. Musk, the world’s richest man, agreed to buy Twitter on April 25 without conducting due diligence in order to get the San Francisco-based company to accept his “best offer.” Since Musk inked his deal to acquire Twitter, 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 50% chance of completion, as investors speculated that the downturn would prompt Musk to walk away or seek a lower price.

Twitter is planning no immediate action against Musk as a result of Musk’s comment, people familiar with the matter said. The company considered the comment disparaging and a violation of the terms of their deal contract, but was encouraged by Musk subsequently tweeting he was committing to the acquisition, the sources added. Musk came to Twitter’s office for a meeting on May 6 as part of the transaction planning process, a Twitter spokesperson said. Twitter CEO Parag Agrawal also weighed in, tweeting “While I expect the deal to close, we need to be prepared for all scenarios.” On Thursday, Agrawal announced leadership changes and a hiring freeze. REAL OR FAKE? Spam or fake accounts are designed to manipulate or artificially boost activity on services like Twitter. Some create an impression that something or someone is more popular than they actually are.

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 5% 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 . Tesla’s stock rose 5% on Friday. The shares have lost about a quarter of their value since Musk disclosed a stake in Twitter on April 4, amid concerns he will get distracted as Tesla’s CEO 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.

For example, French retailer LVMH threatened to walk away from a deal with Tiffany & Co. The U.S. jewelry retailer agreed to lower the price by $425 million to $15.8 billion. Acquirers seeking a get out sometimes turn to “material adverse effect” clauses in their merger agreement, arguing the target company has been significantly damaged. But the language in the Twitter deal agreement, as in many recent mergers, does not allow Musk to walk away because of a deteriorating business environment, such as a drop in demand for advertising or because Twitter’s shares have plunged. Musk is contractually obligated to pay Twitter a $1 billion break-up fee if he does not complete the deal. But the contract also contains a “specific performance” clause that a judge can cite to force Musk to complete the deal. In practice, acquirers who lose a specific performance case are almost never forced to complete an acquisition and typically negotiate a monetary settlement with their targets. DEFEAT THE BOTS

Musk has said that if he buys Twitter he “will defeat the spam bots or die trying” and has blamed the company’s reliance on advertising for why it has let spam bots proliferate. He has also been critical of Twitter’s moderation policy and has said he wants Twitter’s algorithm to prioritize tweets to be public. This week, Musk 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. Trump, who started a rival social media app called Truth Social, took to his platform on Friday to weigh in. “There is no way Elon Musk is going to buy Twitter at such a ridiculous price, especially since realizing it is a company largely based on bots or spam accounts,” Trump wrote in a post, adding that his site is much better.

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