Elon Musk said he is putting his bid to acquire Twitter (TWTR) on hold, weeks after agreeing to take the company private in a $44 billion deal. “Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users,” Musk tweeted on Friday. The news sent Twitter shares down more than 20% in premarket trading.
In his tweet, Musk linked to a May 2 Reuters report about Twitter’s most recent disclosure about its spam and fake account problem.
In its quarterly financial report, released on April 28, Twitter estimated that fake or spam accounts made up fewer than 5% of the platform’s active users during the first three months of the year. Twitter noted that the estimates were based on a review of sample accounts and it believed the numbers to be “reasonable.” But it acknowledged that the measurements were not independently verified and the actual number of fake or spam accounts could be higher.Twitter has had a spam problem for years, and the company has previously acknowledged that reducing fake and malicious accounts would play a key factor in its ability to keep growing. It’s unclear why Musk would back away from the deal because of the latest disclosure.
Musk had offered few details about his plans for the social media company, though he has often spoken out about bot accounts that promoted spam content. He also says the company has been too quick to remove accounts that violate its content-moderation rules. On Tuesday, Musk made headlines by saying he would allow former President Donald Trump to return to Twitter once the takeover was complete. Trump’s account was permanently removed after his followers’ attack on the US Capitol on January 6, 2021.
Skepticism from the start
Even as Musk has worked to secure financing for the takeover, skepticism about whether the deal would go through has been swirling since Twitter’s board agreed to the offer on April 26. Musk said he would buy Twitter for $54.20 a share. But Twitter’s stock never approached that price, hovering below $50 for weeks. That was a sign investors were skeptical that Musk would ultimately make good on his offer.Wall Street analysts weren’t convinced of Musk’s ability to buy Twitter, either — at least not at $54.20 a share. The consensus target price was below $52, and the vast majority put a “hold” rating on the company’s stock.Part of the problem has been Twitter’s connection to Tesla’s (TSLA) fate. Musk, Tesla’s CEO, was planning to borrow against part of his Tesla stake to finance the deal, but Tesla’s stock has been sinking fast alongside most other stocks this year.Musk’s sale of a significant number of Tesla shares to help finance his Twitter deal had also put pressure on the carmaker’s stock. Having already committed a big chunk of his Tesla shares elsewhere, he wasn’t left with much of a cushion should he need to pony up more funds to complete the Twitter takeover.
Tesla’s stock roared 6% higher in premarket trading Friday.