Elon Musk: Twitter deal “temporarily suspended”

Elon Musk: Twitter deal “temporarily suspended”

LONDON (AP) — Elon Musk said Friday that his plan to buy Twitter for $44 billion is “temporarily on hold” as he tries to pinpoint the exact number of spam and fake accounts on the social media platform, a further twist amid signs of internal turmoil over the proposed acquisition.

Musk has been vocal about his desire to get rid of Twitter’s problem with “spam bots” that impersonate real people, and seemed to wonder if the company was underreporting them.

In a tweet, the Tesla billionaire linked to a May 2 Reuters story about a quarterly report from Twitter that estimated fake or spam accounts made up less than 5% of the company’s “monetizable daily active users” in the first quarter.

“Tweet Deal temporarily suspended Pending details support the calculation that spam/fake accounts actually make up less than 5% of users,” Musk said, indicating he is skeptical that the number of inauthentic accounts is so low.

It wasn’t clear if the issue could nullify the deal. Musk later tweeted that he was “still Obliged to purchase.”

Neither Twitter nor Musk responded to requests for comment early Friday.

The issue of fake accounts on Twitter is no secret.

In its quarterly filing with the SEC, even Twitter doubted that the bot account count was accurate, acknowledging that the estimate might be low. “We used significant judgment in making this determination, so our estimate of false or spam accounts may not reflect the actual number of such accounts and the actual number of false or spam accounts may be higher than we estimated,” the statement said filing says.

A review of Twitter filings with the US Securities and Exchange Commission shows that spam bot account estimates and similar doubts about them have been in Twitter’s quarterly and annual reports for at least two years, well before Musk’s were Offer made and it would be known to him and his advisors.

Twitter and Tesla stocks swayed sharply in opposite directions on Friday, with Twitter stocks falling nearly 6% and shares of Tesla, which Musk proposed to fund the Twitter deal, falling nearly 7% ahead of the opening bell rose.

Investors had to weigh legal issues for Musk, as well as the possibility that the Twitter acquisition could be a distraction from running the world’s most valuable automaker. The proposed deal put further pressure on Tesla’s shares, which were already down 16% this week.

The sharp jump in Tesla shares ahead of Friday’s opening bell raised doubts that the Twitter takeover will happen.

Musk has already sold more than $8 billion value of his Tesla shares to fund the purchase.

Musk originally committed to borrowing $12.5 billion using Tesla stock as collateral to buy Twitter. He would also borrow $13 billion from banks and raise $21 billion in Tesla equity.

Last week, Musk increased the equity stake in his bid for Twitter with commitments of more than $7 billion from a diverse group of investors, including Silicon Valley heavyweights like Oracle co-founder Larry Ellison.

The money from the new investors reduces the amount borrowed to the value of Tesla stock at $6.25 billion, the filing said. Tesla’s shareholding could rise to $27.25 billion from $21 billion.

Wedbush analyst Dan Ives, who follows both Tesla and Twitter, said Musk’s “bizarre” tweet will cause Wall Street to either believe the deal is likely to fall apart, Musk is trying to negotiate a lower deal price, or he’s just walking away face a $1 billion fine.

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

He added that Musk’s use of Twitter instead of a financial file for the announcement was troubling and “sends this whole deal into a circus show with lots of questions and no concrete answers on how this deal is going forward.”

Musk’s tweet comes a day after the social media company fired two of its top executives. Twitter said the company was pausing most hiring, except for critical roles, and was “retiring non-labor costs to ensure we act responsibly and efficiently.”

In a memo sent to employees and confirmed by Twitter, CEO Parag Agrawal said the company hasn’t hit growth and revenue milestones after the company began investing “aggressively” to expand its user base and revenue.

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AP business writer Michelle Chapman in New York contributed to this report.

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