Elon Musk says $44 billion Twitter deal on hold over fake account data
Elon Musk tweeted on Friday that his $44-billion cash deal for Twitter Inc. was “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% in premarket trading, but after Musk, the chief executive of electric car market Tesla Inc., sent a second tweet saying he remained committed to the deal, they regained some ground.
The shares were down 10% to $40.50 in morning trading on Friday, a steep discount to the $54.20 per share acquisition price.
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." This could make it harder for him to argue that Twitter somehow misled him.
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 50% 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 5% of users," Musk told his more than 92 million Twitter followers.
Twitter is planning no immediate action 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.
There was no immediate reaction from the investors that Musk tapped last week to raise $7.1 billion in funding.
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.
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.