In a pre-dawn tweet, Elon Musk said his $44 billion offer to buy Twitter is “temporarily on hold,” though he added that he is “still committed to acquisition.”
The world’s richest man suggested that the sudden announcement was prompted by Twitter’s May 2nd SEC filing, which estimated that spam and fake accounts represent less than 5% of active users. Musk has promised that cleaning up these sorts of accounts would be one of his highest priorities as the owner of Twitter, and said he is now waiting on “details supporting calculation that spam/fake accounts do indeed represent less than 5% of users.” In other words, he wants Twitter to prove it.
With few restrictions on new users and an easy signup process, Twitter has struggled with bots and spammers practically since the platform was founded in 2006. That makes Musk’s sudden queasiness around fake accounts hard to understand, and has led some outside observers to wonder if the announcement has more to do with Tesla’s plummeting stock price in a market that has become bearish on the tech sector.
Musk is estimated by Forbes to be worth over $230 billion, but according to an analysis conducted last year, as much as 70% of his wealth is in Tesla stock. Besides that, his ability to purchase Twitter originally depended on a $12.5 billion margin loan tied to his Tesla stock, though he was later able to halve it to $6.25 billion after securing additional financing. He might now be sweating that loan; Tesla closed at $728 per share last night, down 36% from its April 4th price of $1145.45. According to Bloomberg, as recently as yesterday he was trying to find new funding that would allow him to scrap the margin loan.
Perhaps he’s ready to void the deal altogether. Via The New York Times, Daniel Ives, an analyst with Wedbush, said in a note to investors, “Many will view this as Musk using this Twitter filing/spam accounts as a way to get out of this deal in a vastly changing market.”
If Musk pulls out of the sale, the terms of the purchase agreement will require him to pay a $1 billion penalty to Twitter. But if he can prove that Twitter fudged the numbers around fake and spam accounts, he may be able to back out while forfeiting nothing but a little dignity.
No matter what happens, the makeup of Twitter has changed drastically since Musk agreed to buy it in April. Two weeks ago, the platform acknowledged mass deactivations among people who follow celebrities and liberal politicians, while right wing figures have seen their follower counts swell with new users. Musk has also said he hopes to reverse Donald Trump’s Twitter ban, and has floated the idea of charging for embedded tweets and quote tweets.
Still committed to acquisition
— Elon Musk (@elonmusk) May 13, 2022
