Elon Musk says Twitter deal is temporarily on hold

Elon Musk says Twitter deal is temporarily on hold

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SAN FRANCISCO — Elon Musk tweeted early Friday that his $44 billion bid to buy Twitter was put on hold while investigating the number of spam accounts on the site, sending the company’s shares sharply lower .

“Twitter deal temporarily on hold pending details supporting calculation that spam/accounts are actually less than 5% of users,” he tweeted, linking to a Reuters article from last week, citing a Twitter Submission.

About two hours later, he added, “Still engaged in acquisition.”

It wasn’t immediately clear how the Tesla CEO would pause the deal or how serious the threat was. Musk is prone to brazen comments on Twitter, which has come under scrutiny from the Securities and Exchange Commission. The terms of the deal include a $1 billion break-up fee.

Musk and Twitter did not immediately respond to requests for comment.

At the Financial Times’ Future of the Car summit on May 10, the Tesla CEO said it was “absolutely stupid” to permanently ban then-President Donald Trump from Twitter. (Video: Financial Times)

Elon Musk says he would reverse Donald Trump’s Twitter ban

Prior to the tweet, Musk was already scouting for additional investors to buy as a market downturn puts its funding under pressure.

Tesla has lost $400 billion in market value since Musk’s interest in Twitter became public in early April, slowing its acquisition plans at a time when he has committed $21 billion of his wealth to fund the purchase. Musk had planned to buy Twitter with a combination of loans and equity commitments, including much of his stake in the world’s most valuable automaker — from which he derives most of his wealth — in the deal.

Musk’s net worth, which makes him the richest man in the world, has fallen by around $50 billion in the past few weeks, according to Forbes’ real-time wealth index. And Tesla stock has lost almost 30 percent of its value in the past month alone.

Musk last week announced more than $7 billion in funding from sources including investment firms, Oracle founder Larry Ellison, cryptocurrency exchange Binance, Qatar’s sovereign wealth fund and Saudi Prince Alwaleed bin Talal.

Musk gets help from tech titans and a Saudi prince in the Twitter bid

Now, due to the economic downturn and the weakening of Tesla’s stock price, Musk has been looking for additional investments beyond what he originally planned, according to people familiar with the negotiations, who spoke on condition of anonymity, citing the sensitivity of the discussions .

Partly because of the downturn, Musk and the bankers involved in the deal have been under pressure to solidify partners. Among them: Yahoo owner Apollo Global Management, who is expected to provide more than $1 billion in funding with a group of partners, according to one of the people.

And CNBC reported Thursday that startup investor Jason Calacanis was lining up investors to participate in Musk’s takeover bid. Potential investors who spoke to the Washington Post said interest in Musk’s offer remains high, as he believes he would make his investment well, despite his statement that Twitter’s economic viability is not his concern.

Twitter shares fell about 20 percent in premarket trade after the tweet but managed to pare losses; they were down 9.5 percent shortly after the opening bell. Tesla shares opened 6.2 percent higher before falling. Investors in the Musk-led electric car company were worried the billionaire was using his stake to fund the Twitter deal.

It wouldn’t be the first time Musk has tweeted something that moves markets; sometimes practice gets him into trouble. Most notably, he tweeted in 2018 that he had secured funding to take Tesla private for $420 a share. The SEC fined him $20 million. He also tweeted that Tesla is overvalued and tweeted a poll asking the public if he should sell some of his Tesla stake.

Five reasons why the Twitter deal could still fail

There were no new SEC filings regarding the deal Friday morning, the normal way to deal with major changes, analysts said.

“Doing this in a tweet and not a filing is unconscionable and puts the market on a circus show,” said Dan Ives, analyst at Wedbush Securities.

The problem of Twitter bots is also not new to Musk. He has cited ridding the social media site of spam bots or automated accounts that often promote products or programs as one of his key areas of focus for improving Twitter.

“If our Twitter bid is successful, we will defeat the spam bots or die trying!” he tweeted last month. In a TV interview this week, he reiterated that the company needs to crack down on the bots and build trust with users.

Some experts said renegotiating the price of the deal could be a tactic.

“All I can say is that when it comes to mergers, it’s pretty thin slate to cancel a deal,” said Ann Lipton, associate professor of law at Tulane University. “Sometimes this is used as a basis for renegotiating a deal price, but again, unless the issue is having a far greater financial impact on Twitter than has been reported, it’s not a strong reason to be.”

Lipton said issues, including user accounts, would normally have been reviewed before the sides settled on a deal.

Here’s what Musk said about buying Twitter

The terms of Musk’s deal to acquire Twitter allow him to tweet about his acquisition “so long as such tweets do not disparage the company or any of its representatives.”

The deal has already caused quite a stir internally to Twitter since it was announced last month. CEO Parag Agrawal announced the departure of two top executives this week, and many employees have raised concerns about what Musk’s acquisition could mean for the company.

Some employees are particularly suspicious of Musk’s calls to promote “freedom of speech” on the site, an attitude they fear could lead to a rollback of the security policies the company has put in place to protect users online.

In recent days, Musk has warned that he does not yet own Twitter, although he has set out clear plans for the social media service — such as restoring former President Donald Trump’s account, who died after January 6, 2021 was locked , attack on the US Capitol.

“When the Twitter acquisition is complete, the company will focus heavily on hardcore software engineering, design, [information security] & server hardware”, hey wrote in a tweet last week, adding, “Also, work ethic expectations would be extreme, but a lot less than I ask of myself.”

He said at a summit with the Financial Times on Tuesday that banning Trump “was a morally bad decision, to put it bluntly, and extremely foolish.”

The deal could also be influenced by external factors such as B. a regulatory review by the Federal Trade Commission or the SEC. The Wall Street Journal reported Wednesday that the SEC is investigating Musk for late notification that he had acquired a 5 percent stake in Twitter.

The Washington Post previously reported that it may have netted him $156 million.

Musk has used much of his Tesla stock as collateral for his loans, making the recent economic downturn a particular concern for his bid. Tesla has warned of the risks it faces due to the amount of Tesla stock Musk has pledged as collateral. Tesla stock was trading below $730 on Thursday, well below the $1,100-plus mark from early April. A drop of several hundred dollars could trigger demands that would force Musk to sell some shares, analysts said.

At one point last year, he had pledged more than half of his shares as collateral, according to financial records. Because the Twitter offering would only increase that exposure, Musk faced pressure to reduce his equity exposure, said people with knowledge of the matter, who spoke on condition of anonymity to discuss sensitive matters.

Elon Musk is worth $270 billion. He would buy Twitter with a promissory note.

In its annual filing, Tesla was open about the potential risk.

“If Elon Musk were forced to sell shares of our common stock that he has pledged to secure certain personal loan obligations, such sales could result in our stock price falling,” the document reads.

“We are not a party to these loans,” the company wrote. If the stock price falls, Tesla wrote, Musk could be forced by banks to sell Tesla stock to meet his loan obligations.

That could further weigh on the stock.

“It’s becoming a spiral,” Ives said.

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