Wednesday, June 19, 2024
25 C
Brunei Town

Musk puts Twitter buy ‘on hold’, casting doubt on USD44B deal

DETROIT (AP) – Tesla billionaire Elon Musk (AP, pic below) put his plan to buy Twitter on what he called a temporary “hold”, raising fresh doubts about whether he’ll proceed with the USD44 billion acquisition.

Musk tweeted on Friday that he wanted to pinpoint 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 appeared to question whether Twitter was underreporting them.

But the company disclosed in regulatory filings that its bot estimates might be low for at least two years, leading some analysts to believe that Musk could be raising the issue as a reason to back out of the purchase.

“Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than five per cent of users,” Musk tweeted, indicating he’s skeptical that the number of inauthentic accounts is that low.

Musk subsequently tweeted that he’s “still committed to acquisition”. Neither Twitter nor Musk responded to requests for comment. Musk conducted a long flirtation with Twitter that culminated in an April deal to acquire the social platform.

The problem of fake accounts on Twitter is not a secret.

In its quarterly filing with the United States (US) Securities and Exchange Commission (SEC), Twitter itself expressed doubts that its count of bot accounts was correct, conceding that the estimate may be low.

“In making this determination, we applied significant judgement, so our estimation of false or spam accounts may not accurately represent the actual number of such accounts, and the actual number of false or spam accounts could be higher than we have estimated,” the filing said.

A review of Twitter filings with the SEC shows that the company’s estimate of spam bot accounts and similar language expressing uncertainty about it have been in Twitter’s quarterly and annual reports for at least two years, well before Musk made his offer.

Professor of business journalism and financial communication at Quinnipiac University Sara Silver said it appears Musk is using the number of spam accounts as a pretext to pull out of the deal.

“To claim that this is the reason that he’s putting the deal on pause, it’s not credible,” Silver said. “This is not a new issue for him. It’s not just entering his consciousness now.”

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

If the deal doesn’t go through, Musk could have to pay a USD1 billion breakup fee.

He added that Musk’s use of Twitter rather than a financial filing to make the announcement was troubling and “sends this whole deal into a circus show with many questions and no concrete answers as to the path of this deal going forward”.

Using Twitter to make a major announcement that moved the share prices of two companies could be problematic for Musk.

Under a 2018 securities fraud settlement with the SEC, Musk has to get approval from a Tesla lawyer before tweeting anything that could influence the company’s share price.

It wasn’t clear whether Musk got such approval for his 5.44am tweet on Friday announcing suspension of the Twitter deal.