Washington: Elon Musk tweeted yesterday that his $44 billion cash deal for Twitter 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 per cent in premarket trading, but after Musk, the chief executive of electric car market Tesla, sent a second tweet saying he remained committed to the deal, they regained some ground.
The shares were down 8.6pc to $41.19 in midday trading yesterday, 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 50pc 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 5pc of users,” Musk told his more than 92 million Twitter followers.
Twitter is planning no immediate action as a result of Musk’s comment, sources 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.
There was no immediate reaction from the investors that Musk tapped last week to raise $7.1bn 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 10 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 5pc since 2013, according to regulatory filings from Twitter, prompting some analysts to question why Musk was raising it now.
“This 5pc 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.
Tesla’s stock rose 4pc on yesterday morning. The shares have lost about a quarter of their value since Musk disclosed a stake in Twitter of 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.
In one instance, French retailer LVMH threatened to walk away from a deal with Tiffany. The US jewellery retailer agreed to lower the price by $425m to $15.8bn.