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Elon Musk says Twitter takeover deal 'temporarily on hold'

Elon Musk arrives at the In America: An Anthology of Fashion themed Met Gala at the Metropolitan Museum of Art in New York City, New York, U.S., May 2, 2022. REUTERS/Andrew Kelly
Elon Musk says Twitter deal is on hold. Photo: Andrew Kelly/Reuters

Elon Musk’s deal to buy Twitter (TWTR) is on hold until he gets more information about fake accounts on the platform, the Tesla (TSLA) boss has said.

Musk, who last week secured $7bn (£5.7bn) from new investors for his $44bn takeover, tweeted: "Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users."

He linked a Reuters report from 2 May stating Twitter's calculation that bots were only a small percentage of the site's users.

Twitter said that fake and spam accounts represent less than 5% of the users on its platform in a filing earlier this month. The platform said that it had 229 million users who were shown advertising, a key internal metric.

Musk has made cutting down on the amount of “spam and scam bots” and “bot armies” on Twitter a key part of his pitch for improving the service, alongside prioritising free speech, and open-sourcing the platform’s ranking algorithms.

Read more: Elon Musk would reverse ‘morally wrong’ Trump Twitter ban

The billionaire has repeatedly stated that he wants Twitter to become a platform for free speech and to reduce its reliance on advertising.

Elon Musk faces a $1bn termination fee if he pulls out of the takeover.

The news sent Twitter’s shares down 23% in pre-market trading, on concerns that the deal could collapse.

Dan Ives, an analyst at Wedbush, says the latest reverse ferret by Musk is turning the Twitter saga into a farce.

"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.

"The nature of Musk creating so much uncertainty in a tweet (and not a filing) is very troubling to us and the Street and now sends this whole deal into a circus show with many questions and no concrete answers as to the path of this deal going forward."

Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown, said Musk’s move will be "highly frustrating" for many at Twitter.

"Musk’s Twitter takeover was always destined to be a bumpy ride, and now it risks hitting the skids over the number of fake accounts on the platform. Twitter’s share price plunged by around 18% in pre-market trading following his tweet indicating the deal was temporarily on hold.

"He is clearly intent in querying the company’s estimate that spam accounts make up less than 5% of active daily users — a key metric given that establishing an accurate number of real tweeters is considered to be key to future revenue streams via advertising or paid for subscriptions on the site.

Read more: Elon Musk's Twitter takeover: how it unfolded and what to expect next

"This is likely to come as highly frustrating for many in the company given that a number of senior executives have already been laid off in expectation of the takeover and the change in direction he was expected to pursue."

Elon Musk has now tweeted that he’s “Still committed to acquisition”.

Neil Campling at Mirabaud Equity Research called it a "tragi-comedy".

"The tragi-comedy continues and the Twitter situation is nothing short of laughable. We’d always said Musk may cut or run or change his tune at the 11th hour and 59 minutes and 59 seconds on the clock.

"We’re not even close to the 11th hour yet. Farcical. Musk has never had the full funding — we know that from his constant attempts to get financial support — but he also held all the cards.

"The Twitter board have been held hostage and only have themselves to blame for this mess. No other buyer will emerge — if Musk decides he is still interested he can “name his price”… and it won’t be higher!

"The board should have seen this coming. There was a specific performance clause in the merger agreement (section 9.9), which gave Twitter the right to “consummate the closing (of the deal)” but only if Musk had the financing — which, of course, he doesn’t."

Watch: Twitter fires two executives, adding to Musk buyout turmoil