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Black News and Black Views with a Whole Lotta Attitude

Elon Musk Puts Twitter Deal On Hold For Now

The Tesla CEO cited the platform's spam and fake account issue as the reason for the pause

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Tesla CEO Elon Musk is pictured as he attends the start of the production at Tesla’s “Gigafactory” on March 22, 2022, in Gruenheide, southeast of Berlin.
Tesla CEO Elon Musk is pictured as he attends the start of the production at Tesla’s “Gigafactory” on March 22, 2022, in Gruenheide, southeast of Berlin.
Photo: PATRICK PLEUL/POOL/AFP (Getty Images)

After speaking about what changes he would make and letting certain users back on the platform, Tesla CEO Elon Musk has said he is putting his $44 billion deal to buy Twitter on hold, CNN reports.

“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 reason cited for Musk’s pause comes from a Reuters report about Twitter’s most recent disclosure, regarding its spam and fake account problem. Twitter’s quarterly financial report 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 and noted that the estimates were based on a review of sample accounts, and it believed the numbers to be “reasonable.”

But with Musk’s claiming to want to clean up the spam problem and Twitter having trouble stopping bots for years, it’s unclear to some why this would be a potential dealbreaker.

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The news initially sent Twitter shares down more than 20% in pre-market trading before the stock rebounded somewhat. Musk then said, “he’s still committed to the acquisition.” Musk would owe Twitter a $1 billion breakup fee if he were to cancel the deal, as noted by tech analyst Dan Ives of Wedbush Securities in a note to clients early Friday.

From CNN:

“The Street will view this deal as 1) likely falling apart, 2) Musk negotiating for a lower deal price, or 3) Musk simply walking away from the deal with a $1 billion breakup fee,” Ives wrote. “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.”

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Some analysts are also skeptical about the way how the deal being paused was announced. By corporate standards, a person looking to acquire a company would conduct due diligence, a review of the firm’s finances and proprietary information, before a deal closes.

“Usually we’d see some sort of filing that would come first, an amendment to previous filings on the deal, that says, ‘we’ve uncovered some information in the process of due diligence and we’re reconsidering our acquisition,’” said Josh White, an assistant professor of finance at Vanderbilt University and a former financial economist for the SEC.

“This happens as you get access to the books and access to proprietary information. What doesn’t normally happen is a tweet,” White said.