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Friday, May 27, 2022

Musk suspends purchase of Twitter, casts doubt on $44 billion deal

DETROIT ( Associated Press) – Tesla billionaire Elon Musk has put its plan to buy Twitter on a temporary “hold”, raising new doubts about whether it will proceed with the $44 billion acquisition.

Musk tweeted early Friday that he wanted to track the number of spam and fake accounts on the social media platform. He has been vocal about his desire to clean up Twitter’s problem with “spam bots” that mimic real people, and he questions whether Twitter was undermining them.

But the company disclosed in regulatory filings that its bot estimates could be lower for at least two years, leading some analysts to believe Musk raised the issue as a reason to back down from the buyout. can.

“Twitter deal temporarily on hold Pending details supporting the calculation that spam/fake accounts actually represent less than 5% of users,” Musk tweeted on Friday morning, indicating that he suspects the number of unauthorized accounts is so small.

On Friday, Musk later tweeted that he is “still” Committed to AcquisitionNeither Twitter nor Musk responded Friday to requests for comment. Musk has had a lengthy flirtation with Twitter Which culminated in a deal to acquire the social platform in April.

The problem of fake accounts on Twitter is not hidden from anyone.

In its quarterly filing with the US Securities and Exchange Commission, Twitter itself expressed doubts that the number of its bot accounts was accurate, believing that estimates may have been lower. “In making this determination, we applied significant judgment, so our estimate of false or spam accounts may not accurately represent the actual number of such accounts, and the actual number of false or spam accounts may exceed our estimate.” ,” the filing says.

A review of Twitter filings with the SEC shows that estimates expressing uncertainty about the company’s spam bot accounts and similar language have been in Twitter’s quarterly and annual reports for at least two years, according to Musk’s own long before making an offer.

Sarah Silver, a professor of business journalism and financial communications at Quinnipiac University, said it appears Musk is using a number of spam accounts as an excuse to exit the deal.

“To claim that this is the reason he is withholding the deal is not credible,” Silver said. “This is not a new issue for him. It is not entering their consciousness yet.”

Stocks in both Twitter and Tesla jumped sharply in opposite directions on Friday, with Twitter stock down 9.7% and Tesla shares, which Musk proposed to rise 5.7% to help fund the Twitter deal.

But shares of Tesla, which Musk is selling to fund some of Twitter’s acquisitions, have fallen since it was revealed that the social platform had become a Musk target.

Tesla shares have lost a quarter of their value in the past month, and have fallen from about $1,150 in early April when Musk confirmed he had taken a major stake in Twitter, to $769.59 on Friday. .

“It has become a lot more expensive for them to buy this company using their Tesla shares,” Silver said.

Musk’s net worth stood at $232 billion as of Friday, estimated at $240 billion by Forbes earlier this week.

In 2017 academic researchers attempted a census of all active English-language accounts on Twitter and estimated that up to 15% were bots of some sort. University of Southern California professor Emilio Ferrara, who helped lead the research, said Friday that Twitter has gotten better at detecting and consistently removing spam accounts – but they are added to the platform all the time.

“It’s really hard to pinpoint the figure as a whole,” he said. “It’s not possible — unless you’re Twitter — to make a comprehensive estimate of the user base.”

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

Neither Tesla nor its supporters have claimed responsibility for those bots.

Investors assessing the deal have weighed in on Musk’s legal troubles And there’s the possibility that Twitter’s acquisition could be a distraction from driving the world’s most valuable automaker.

Musk has already sold over $8 billion Twitter price their Tesla shares to help fund the purchase.

Originally Musk had committed to borrow $12.5 billion with Tesla stock as collateral. It will borrow another $13 billion from banks and invest $21 billion in Tesla shares that will go to banks in exchange for cash when the deal closes.

Last week, Musk announced commitments of more than $7 billion from investors that would reduce the number of Tesla shares he would have to post as collateral.

Wedbush analyst Dan Ives, who follows both Tesla and Twitter, called Musk’s tweet “bizarre” and said Wall Street is skeptical. “The street view is that he’s basically trying to talk about the deal price or find an excuse to walk away,” Ives said.

If the deal doesn’t go through, Musk could face a $1 billion breakup fee.

He said that Musk’s use of Twitter, rather than a financial filing, to make the announcement was disturbing and “sends this whole deal into a circus show with many questions and no concrete answers about the path forward for this deal.” doesn’t give.”

Using Twitter to make a major announcement that moved the two companies’ share prices could be problematic for Musk. As part of the 2018 Securities Fraud Settlement with the SEC, Musk must obtain approval from Tesla’s attorney before tweeting anything that could affect the company’s stock price. It was unclear whether Musk received such approval for his 5:44 p.m. EDT tweet Friday announcing the postponement of the Twitter deal.

The SEC has already issued summons to Tesla and Musk over a tweet from last fall asking followers if they should sell Tesla stock. A court filing said Musk did not receive the necessary pre-approval.

Last month, a federal judge in New York dismissed Musk’s attempt to overturn the agreement. On the grounds that he signed it under coercion and it is a violation of his right to freedom of expression. The judge also upheld Musk’s subpoena.

The dispute stemmed from an October 2018 agreement with the SEC that Musk signed. He and Tesla each agreed to pay $20 million in civil fines over Musk’s tweet about “funding secured” to take Tesla private at $420 per share. But funding was not on the line and Tesla remains a public company.

On Thursday, Twitter fired two of its top managers., Twitter said the company is halting most hiring except in critical roles, and is “pulling back on nonessential labor costs to ensure we are responsible and efficient.”

In a memo sent to employees and confirmed by Twitter, CEO Parag Agarwal said the company hasn’t hit growth and revenue milestones since it began making “aggressive” investments to expand its user base and revenue. Is.


Chan reported from London. Associated Press Business Writers Michelle Chapman in New York and Matt O’Brien in Providence, Rhode Island contributed to this report.

World Nation News Deskhttps://www.worldnationnews.com
World Nation News is a digital news portal website. Which provides important and latest breaking news updates to our audience in an effective and efficient ways, like world’s top stories, entertainment, sports, technology and much more news.
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