Elon Musk declared he won’t proceed with his $44 billion takeover of Twitter Inc. unless the social media giant can prove bots make up fewer than 5% of its users, casting yet more uncertainty over the deal.
The billionaire tweeted “this deal cannot move forward” unless Twitter provides proof of its claims, reiterating his own view that the ratio is far higher.
Musk’s latest online pronouncement complicates an already chaotic takeover, potentially one of the largest acquisitions the internet industry has ever seen. Parag Agrawal, chief of Twitter, was recently at odds with Musk over how Twitter accounts for bots. This has sparked speculation that Musk might try to reduce the price or walk away.
Twitter’s shares fell another 3.2% in pre-market trading in New York, after sliding more than 8% the previous day. The spread between Musk’s offer price of $54.20 and its last trading price is currently about 40%, suggesting investors think there is little chance the deal will get done without a discount—if at all.
Twitter said it is “committed to completing the transaction on the agreed price and terms as promptly as practicable,” in a statement on Tuesday.
“If a revised deal does get done by Musk and Twitter,” said Dan Ives, analyst at Wedbush, “it will likely will be at a much lower price once negotiations take over and the diligence happens around Twitter DAU and algorithms hot button issues.
20% fake/spam accounts, while 4 times what Twitter claims, could be *much* higher.
My offer was based on Twitter’s SEC filings being accurate.
Yesterday, Twitter’s CEO publicly refused to show proof of <5%.
The deal can’t move forward until he makes it.
— Elon Musk (@elonmusk) May 17, 2022
Musk has been unable to overcome the bot wars. He stated Monday at a Miami tech conference that fake accounts make up 20% of all Twitter accounts. This could be as high as 90%. Twitter regularly states in its quarterly results that the average of false or spam accounts “represented fewer than 5% of our monthly daily active users during the quarter,” adding that it applied “significant judgment” to its estimate, and the true number could be higher.
Musk encouraged users on Twitter to conduct their own bot tests, crowdsourcing the effort and calculating if they were less than 5%. Responding to Musk’s assertions, Agrawal posted a long thread laying out his company’s methodology. Musk replied by first asking why Twitter doesn’t just call users to verify their identity — and then by posting a poop emoji.
Musk would have to pay $1 billion in breakup fees if the takeover is terminated or he fails to provide the required funding. It is unclear whether an update by Twitter on the number of fake accounts—if materially larger than 5%—would trigger a so-called material adverse effect clause, releasing Musk from the breakup fee.
The latest barrage of tweets from the world’s richest person is yet another twist in Musk’s attempted takeover of the micro-blogging site. A prolific user with over 90 million followers, he revealed a stake of more than 9% in the company last month, then launched an unsolicited takeover offer—without detailed financing plans—all within a matter of weeks.
Musk caused the potential cracks in the deal to widen last week when he tweeted that his offer to buy Twitter was “temporarily on hold” until he gets more information about the proportion of fake accounts. Roughly two hours later, Musk claimed in another tweet that he was “still committed” to the deal.
—With assistance from Subrat Patnaik.
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