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Elon Musk suspends Twitter buy, casting doubt on $44 billion deal – CBS Detroit

DETROIT (AP) — Tesla billionaire Elon Musk has temporarily suspended plans to buy Twitter, raising further doubts about the $44 billion acquisition going forward.

Musk tweeted early Friday that he wanted to identify the number of spam and fake accounts on the social media platform. He expressed his desire to fix Twitter’s problem with “spam bots” that impersonate real people, and he seemed to wonder if Twitter was underreporting them.

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But the company has disclosed in regulatory filings that its bot estimates could be low for at least two years, leading some analysts to believe Musk could raise the issue as a reason to back out of the purchase.

“Twitter case temporarily on hold pending details supporting the calculation that spam/fake accounts indeed represent less than 5% of users,” Musk tweeted Friday morning, indicating he was skeptical of the number of inauthentic accounts.

On Friday, Musk then tweeted that he was “always has undertaken to acquire.” Neither Twitter nor Musk responded to requests for comment on Friday. Musk had a long flirtation with Twitter that culminated in a deal in April to acquire the social platform.

The problem of fake accounts on Twitter is no secret.

In its quarterly filing with the U.S. Securities and Exchange Commission, Twitter itself expressed doubts about the accuracy of its bot account count, admitting the estimate might be low. “In making this decision, we exercised significant judgment, so our estimate of fake or spam accounts may not accurately represent the actual number of such accounts, and the actual number of fake or spam accounts may be higher. at what we have estimated,” the filing said. said.

A review of Twitter’s SEC filings shows that the company’s estimate of spam bot accounts and similar language expressing uncertainty about it have been featured in Twitter’s quarterly and annual reports for at least two years, well before until Musk does his bidding.

Sara Silver, professor of corporate journalism and financial communication at Quinnipiac University, said it appears Musk is using the number of spam accounts as a pretext to pull out of the deal.

“To claim that’s why he’s pausing the deal is not believable,” Silver said. “It’s not a new issue for him. It’s not just about getting into his consciousness now.

Shares of Twitter and Tesla swung sharply in opposite directions on Friday afternoon, with shares of Twitter falling nearly 9% and shares of Tesla, which Musk had offered to help fund the Twitter deal , increasing by about 8%.

But shares of Tesla, which Musk sold to fund part of the Twitter acquisition, have fallen since the social platform was revealed to have become a target of Musk.

Tesla shares have lost a quarter of their value over the past month and fell from around $1,150 in early April when Musk confirmed he had taken a huge stake in Twitter, to $785.25 on Friday.

“It became much more expensive for him to buy this company using his Tesla stock,” Silver said.

Musk’s net worth, estimated by Forbes earlier this week at $240 billion, fell to $223 billion on Friday.

Tesla shares may also have benefited from Twitter bot accounts over the years. A University of Maryland researcher recently concluded that such bots were used to generate hundreds of thousands of positive tweets about Tesla, potentially buoying its stock through the years it was under pressure.

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Neither Tesla nor its supporters have taken responsibility for these bots.

Investors evaluating the deal had to weigh Musk’s legal troubles and the possibility that the Twitter acquisition could be a distraction from running the world’s most valuable automaker. The proposed deal continued to pressure Tesla shares, which had already fallen 16% this week.

Musk has already sold more than $8 billion of his Tesla stock to help fund the Twitter purchase.

Originally, Musk pledged to borrow $12.5 billion with Tesla stock as collateral to buy Twitter. It would also borrow $13 billion from banks and invest $21 billion in Tesla equity.

Musk last week bolstered Twitter’s bid with commitments of more than $7 billion from a diverse group of investors, including Silicon Valley heavyweights like the Oracle co-founder. , Larry Ellison.

The money from the new investors reduces the amount borrowed against Tesla’s stock value to $6.25 billion, according to the filing. Tesla’s equity share could rise from $21 billion to $27.25 billion.

Wedbush analyst Dan Ives, who follows both Tesla and Twitter, said Musk’s ‘weird’ tweet would lead Wall Street to think the deal is likely falling apart, Musk tries to negotiate a lower price, or he just walks away paying a $1 billion fine.

“Many will see this as Musk using these Twitter drop/spam accounts as a way out of this deal in a changing market,” Ives wrote.

He added that Musk’s use of Twitter rather than a financial record to make the announcement was troubling and “sends this whole deal into a circus spectacle with many questions and no concrete answers as to a way forward. for this deal.”

Using Twitter to make a major announcement that moved the stock price of two companies could be problematic for Musk. As part of a 2018 securities fraud settlement with the SEC, Musk must get approval from a Tesla attorney before tweeting anything that could influence the company’s stock price. It was unclear whether Musk had gained such approval for his 5:44 a.m. EDT tweet on Friday announcing the suspension of the Twitter deal.

The SEC has already issued subpoenas to Tesla and Musk following a tweet last fall asking his followers if he should sell Tesla stock. A court filing says Musk failed to get the required pre-approval.

Last month, a federal judge in New York dismissed Musk’s attempt to throw out the settlement on the grounds that he signed it under duress and violated his right to free speech. The judge also upheld Musk’s subpoena.

The dispute stemmed from an October 2018 settlement with the SEC that Musk signed. He and Tesla each agreed to pay $20 million in civil penalties for Musk’s tweets about securing “funding” to take Tesla private at $420 a share. But funding has not been lined up and Tesla remains a public company.

On Thursday, Twitter fired two of its top executives. Twitter said the company is suspending most hiring, except for critical positions, and “reducing non-salary costs to ensure we are accountable and efficient.”

In a memo sent to employees and confirmed by Twitter, CEO Parag Agrawal said the company fell short of growth and revenue milestones after the company began “aggressively” investing to expand its user base. and its income.

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