Musk Claims a $44 Billion Twitter Deal Has Been Put on Hold Because of False Account Data!
Elon Musk said on Friday that his $44 billion cash purchase for Twitter Inc (TWTR.N) is “temporarily on pause” while he waits for evidence on the number of false 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 carmaker Tesla Inc (TSLA.O), published a second tweet suggesting he was still committed to the acquisition.
The stock dropped 9.6% to $40.71 in Friday trade, a significant discount from the $54.20 per share purchase price.
Musk, the world’s richest man, agreed to purchase Twitter on April 25 without doing due diligence in order to persuade the San Francisco-based firm to accept his “best and last offer.” This might make it more difficult for him to claim that Twitter deceived him.
Technology equities have plummeted since Musk announced his acquisition of Twitter, owing to investor fears about inflation and a probable economic downturn.
As investors worried that the slump might cause Musk to walk away or seek a cheaper price, the difference between the offer price and the value of Twitter shares has increased in recent days, signifying less than a 50% likelihood of completion. continue reading
“Twitter transaction on hold temporarily seeking details supporting computation that spam/fake accounts constitute fewer than 5% of users,” Musk said to his 92 million Twitter followers.
“To find out,” Musk wrote, “my team will do a random sampling of 100 followers” on the microblogging site, asking others to “see what they uncover.”
“We can definitely crowdsource a reasonable answer if we try to find out the bot/duplicate user percentage as a group.”
Musk responded to a follower who wondered why he hadn’t considered this before agreeing to acquire Twitter by tweeting that he had “relied upon the veracity of Twitter’s public filings.”
Musk has the right under the terms of his contract with Twitter to request information on the company’s activities once the transaction is signed.
However, this is intended to assist him in preparing for his ownership of Twitter, not to do due diligence or resume discussions.
According to those familiar with the situation, Twitter has no imminent plans to take action against Musk as a result of his statement.
The firm found the remark demeaning and in breach of the terms of their transaction contract, but was heartened when Musk later tweeted that he was committed to the acquisition, according to the sources.
Musk visited Twitter’s offices on May 6 for a meeting as part of the transaction preparation process, according to a Twitter representative.
“While I expect the deal to conclude,” Twitter CEO Parag Agrawal said, “we need to be prepared for all possibilities,” Agrawal announced leadership changes and a hiring freeze on Thursday. continue reading
FAKE OR REAL?
Spam or fraudulent accounts are created with the intent of manipulating or artificially increasing activity on social media platforms like Twitter. Some people give the idea that something or someone is more well-known than they are.
Musk mentioned the bogus account data in a Reuters piece from 10 days earlier. The statistics were an estimate, according to Twitter, and the true number might be higher.
According to regulatory filings from Twitter, the estimated number of spam accounts on the microblogging site has remained below 5% since 2013, causing some analysts to query why Musk was upping it now.
“This 5% figure has been around for a while. He would have seen it immediately… As a result, it’s possible that it’s part of a price-cutting effort “Hargreaves Lansdown analyst Susannah Streeter said.
Musk’s representatives did not immediately reply to Reuters’ requests for comment.
Tesla’s shares increased by 5% on Friday. Since Musk declared a stake in Twitter on April 4, the stock has lost almost a quarter of its value, raising fears that he may become distracted as Tesla’s CEO and that he may have to sell additional Tesla shares to fund the acquisition.
There is plenty of precedence for a possible price renegotiation after a market slump. When the COVID-19 epidemic struck in 2020, some firms renegotiated agreed-upon acquisitions, causing a global economic crisis.
For example, LVMH (LVMH.PA), a French retailer, threatened to pull out of an agreement with Tiffany & Co. The price of the jewelry retailer in the United States has been reduced by $425 million to $15.8 billion.
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Acquirers looking for a way out frequently invoke “substantial adverse effect” clauses in their merger agreements, claiming the target firm has been severely harmed.
However, unlike many previous mergers, the Twitter acquisition agreement does not allow Musk to back out due to a deteriorating economic climate, such as a decline in advertising demand or a drop in Twitter’s stock price.
If Musk does not complete the acquisition, he is liable to pay Twitter a $1 billion breakup fee. However, the contract includes a “particular performance” language that a judge may utilize to compel Musk to finish the transaction.
In fact, acquirers that lose a specific performance case are usually never obligated to finish the transaction and instead negotiate a monetary settlement with their targets.
DESTROY THE BOTS
Musk has stated that if he purchases Twitter, he will “destroy the spambots or die trying,” blaming the company’s reliance on advertising for allowing spam bots to flourish.
He’s also been critical of Twitter’s moderation policy, claiming that the algorithm should prefer public messages.
Musk stated this week that if he acquires Twitter, he will lift the restriction on former US President Donald Trump, showing his goal to reduce moderation.
On Friday, Trump, who founded a competing social networking program called Truth Social, turned to his site to comment.
“There is no way Elon Musk is going to acquire Twitter for such a ludicrous price,” Trump said in a post, adding that his site is far superior.