Elon Musk: Twitter Deal ‘Temporarily on Hold’ | Business News

 Elon Musk: Twitter Deal ‘Temporarily on Hold’ | Business News

By KELVIN CHAN and TOM KRISHER, AP Business Writers

DETROIT (AP) – Elon Musk said Friday that his plan to buy Twitter was “temporarily thwarted” as he tried to figure out the exact number of spam and fake accounts on the social media platform, a yet twist between signs of chaos at the proposed $ 44. billion claim.

Musk expressed his desire to clean up the Twitter problem using “spam bots” that impersonate real people and appeared to be skeptical of whether the company was underreporting them.

In a tweet, the Tesla billionaire linked to a Reuters story from May 2 about a quarterly report from Twitter that estimated false or spam accounts accounted for less than 5% of the company which was “seen every day as an active user” in the first quarter.

“The Twitter deal has temporarily withheld pending details that support the calculation that spam / fake accounts actually represent at least 5% of users,” Musk said, indicating that he doubts that the number of false accounts is low.

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It’s unclear if the issue could ruin the deal. Musk later tweeted that he was “still committed to the claim.”

Neither Twitter nor Musk responded Friday to requests for comment.

The issue of fake Twitter accounts is no secret.

In its quarterly filing with the SEC, even Twitter doubted that the bot account count was correct, claiming the estimate would be small. “In making this determination, we used significant judgment, so that our estimate of false or spam accounts may not accurately represent the actual number of such accounts, and the actual number of false or spam accounts. account may be higher than we estimated, “the filing. says.

A review of Twitter filings by the U.S. Securities and Exchange Commission shows that estimates of spam bot accounts and similar language expressing doubts about it are in quarterly and annual Twitter reports within at least two years, before Musk makes his offer and it happens. he and his advisers knew.

Sara Silver, a professor of business journalism and financial communication at Quinnipiac University, said Musk used the number of spam accounts as an excuse to back down the deal.

Musk, he says, has known about bot accounts for a long time and chose it as something he wanted to fix. “Claiming that this was the reason he stopped the deal, it’s not credible,” Silver said. “It’s not a new issue for him. It’s not just entering his consciousness right now. ”

Stocks of both Twitter and Tesla moved sharply in opposite directions on Friday, with Twitter stock falling nearly 10% and shares of Tesla, which Musk suggested to use to help fund the Twitter deal, jumped almost 6%.

But shares in Tesla, which Musk sold to fund some Twitter acquisitions, have fallen since it was revealed the company had become Musk’s target.

Those shares lost a quarter of their value last month, and fell from about $ 1,150 in early April when Musk confirmed he had acquired a large stake on Twitter, to about $ 762. on Friday.

“That’s why it became more expensive for him to buy this company using his Tesla shares,” Silver said.

Musk’s net worth, which Forbes estimated earlier this week at $ 240 billion, fell to $ 223 billion on Friday.

Tesla shares may have benefited from Twitter bot accounts for many years as well. A researcher at the University of Maryland recently concluded that such bots are used to generate hundreds of thousands of positive tweets about Tesla, which could potentially boost its stock in the years it is under pressure.

Neither Tesla nor its supporters have any responsibility for the bots.

Investors will have to weigh the legal hurdles for Musk, as well as the possibility that Twitter’s acquisition could disrupt the operation of the world’s most valuable automaker. The proposed deal continues to put pressure on shares of Tesla, which have already fallen 16% this week.

The sharp jump in the price of Tesla shares ahead of Friday’s opening bell sang on rising doubts that Twitter’s acquisition would happen.

Musk has already sold more than $ 8 billion worth of its shares to Tesla to fund the purchase.

Musk initially promised to borrow $ 12.5 billion with Tesla stock as collateral to buy Twitter. He will also borrow $ 13 billion from banks and put $ 21 billion in Tesla equity.

Last week, Musk strengthened the equity stake in his offer for Twitter with commitments of more than $ 7 billion from a variety of investor groups including heavy hitters in Silicon Valley such as of Oracle co-founder Larry Ellison.

Money from new investors cut the amount borrowed on Tesla stock to $ 6.25 billion, according to the filing. Tesla’s share of equity could range from $ 21 billion to $ 27.25 billion.

Wedbush analyst Dan Ives, who follows Tesla and Twitter, said Musk’s “strange” tweet would lead Wall Street to think the deal was likely to break even, Musk tried to negotiate a more low deal price, or he’s just walking away from facing a $ 1 billion penalty.

“Many see it as Musk using these Twitter filing/spam accounts as a way to get this deal out of a big change in the market,” Ives wrote.

He added that Musk’s use of Twitter instead of a financial filing to make the announcement was troublesome and “sent this whole deal to a circus show with a lot of questions and no concrete ones. response about the course of this deal going forward. “

Musk’s tweet comes a day after the social media company fired two of its top managers. Twitter says the company has stopped most hiring, except for critical tasks, and “recouped non-working costs to make sure we’re responsible and efficient.”

In a memo sent by employees and confirmed on Twitter, CEO Parag Agrawal said the company did not hit growth and revenue milestones after the company started investing “aggressively” to expand its user base and revenue. .

Chan reported from London. AP Business Writer Michelle Chapman of New York contributed to this report.

Copyright 2022 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or distributed.

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