Elon Musk has put his Twitter takeover ‘on hold’. The Tesla boss reports this in a tweet. He first wants additional details about the number of fake accounts on Twitter.
The deal has been put on hold “pending details to support the calculation that spam/fake accounts do indeed represent less than 5 percent of users.” writes Musk.
The company had estimated earlier this month that fake or spam accounts represented less than 5 percent of its daily active users in the first quarter. Musk has previously indicated that one of his priorities would be to keep spambots off the platform. A smaller number of human users means that the platform is less interesting for advertisers, which is about Twitter’s only source of income.
Musk has not yet announced what his next step is. Is he canceling the takeover or is he trying to negotiate a cheaper takeover price? The fact is that the tech sector has fallen sharply since he made the $44 billion bid on the stock market. If he made an offer today, he certainly wouldn’t be offering $54.2 a share. He may invoke the large number of fake accounts as a new element depressing the company’s valuation. On that basis, he can reopen negotiations with Twitter’s board of directors and withdraw the $54.2-per-share offer. He can then propose a lower price and hope that Twitter’s board of directors accepts that proposal.
That would not be the first time in the acquisition world. Luxury group LVMH, for example, lowered its initial offer for jeweler Tiffany & Co two years ago. with the excuse that the corona crisis depressed the valuation.
A second point is that Musk calls off the case. The false accounts are then an excuse he can use to reduce the penalty clauses associated with canceling the takeover. In recent days there have been few signs that he intends to do so: the list of co-financiers only got longer.
Musk was already sharply reducing his own exposure. Initially, he would pledge $12.5 billion in Tesla stock for a loan. Last week it was announced that that would only be 6.25 billion. Yesterday there was already talk about the fact that Musk would not take out a loan at all and would collect that 12.5 billion from new shareholders, which may show that Musk is becoming less convinced whether the Twitter takeover is financially interesting for him.
Those who are happy with a possible cancellation of the deal are the shareholders of Tesla. The stock gains 5.9% pre-market. Twitter, on the other hand, is down 15.1 percent.