NATIONAL NEWS

Musk puts Twitter buy ‘on hold,’ casting doubt on $44B deal

May 13, 2022, 5:23 AM | Updated: Jun 13, 2022, 11:01 am
FILE: Tesla head Elon Musk talks to the press as he arrives to to have a look at the construction s...
FILE: Tesla head Elon Musk talks to the press as he arrives to to have a look at the construction site of a new Tesla Gigafactory. (Photo by Maja Hitij/Getty Images)
(Photo by Maja Hitij/Getty Images)

DETROIT (AP) — Tesla billionaire Elon Musk has put his plan to buy Twitter on what he called a temporary “hold,” raising fresh doubts about whether he’ll proceed with the $44 billion acquisition.

Musk tweeted early 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 has 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 5% of users,” Musk tweeted Friday morning, indicating he’s skeptical that the number of inauthentic accounts is that low.

On Friday, Musk subsequently tweeted that he’s “still committed to acquisition.” Neither Twitter nor Musk responded Friday to requests for comment. Musk has 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 U.S. Securities and Exchange Commission, 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 judgment, 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 says.

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.

Sara Silver, a professor of business journalism and financial communication at Quinnipiac University, 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.”

Stock in both Twitter and Tesla swung sharply in opposite directions Friday, with Twitter stock falling over 9% and shares of Tesla, which Musk had proposed using to help fund the Twitter deal, rising about 6%.

But shares of Tesla, which Musk has been selling to fund some of the acquisition of Twitter, have tumbled since it was revealed the social platform had become a Musk target.

Tesla shares have lost a quarter of their value in the last month, and have fallen from about $1,150 in early April when Musk confirmed he had taken a huge stake in Twitter, to $771.41 Friday.

“It’s become much more expensive for him to buy this company using his Tesla shares,” Silver said.

Musk’s net worth, estimated by Forbes earlier this week at $240 billion, was $232 billion as of Friday.

Tesla shares may have benefitted from Twitter bot accounts over the years as well. A University of Maryland researcher recently concluded that such bots have been used to generate hundreds of thousands of positive tweets about Tesla, potentially buoying its stock in years when it was under pressure.

Neither Tesla nor its supporters have taken responsibility for those bots.

Investors assessing the deal have had to weigh Musk’s legal troubles and the possibility that acquiring Twitter could be a distraction from running the world’s most valuable automaker.

Musk has already sold off more than $8 billion worth of his Tesla shares to help finance the Twitter purchase.

Originally Musk had committed to borrowing $12.5 billion with Tesla stock as collateral. He would borrow $13 billion more from banks and put up $21 billion in Tesla shares that would go to banks in exchange for cash when the deal closes.

Last week, Musk announced commitments of more than $7 billion from investors that would reduce the number of Tesla shares he would have to post as collateral.

Wedbush analyst Dan Ives, who follows both Tesla and Twitter, 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 $1 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 5:44 a.m. EDT tweet Friday announcing suspension of the Twitter deal.

The SEC already has issued subpoenas to Tesla and Musk over a tweet from last fall asking followers if he should sell Tesla stock. A court filing says Musk didn’t get the required pre-approval.

Last month, a federal judge in New York rejected Musk’s attempt to throw out the settlement on grounds that he signed it under duress and that it violates his right to free speech. The judge also upheld the Musk subpoena.

The dispute stemmed from an October 2018 agreement with the SEC that Musk signed. He and Tesla each agreed to pay $20 million in civil fines over Musk’s tweets about having the “funding secured” to take Tesla private at $420 per share. But the funding was not lined up and Tesla remains a public company.

On Thursday, Twitter fired two of its top managers. Twitter said the company is pausing most hiring, except for critical roles, and is “pulling back on non-labor costs to ensure we are being responsible and efficient.”

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

____

Chan reported from London. AP Business Writer Michelle Chapman in New York contributed to this report.

KSL 5 TV Live

Top Stories

National News

Law enforcement officers aim their weapons at a home during a standoff in Grants Pass, Ore., on Tue...
Associated Press

Oregon kidnapping suspect dies of self-inflicted gunshot

The suspect in a violent kidnapping in Oregon has died of a self-inflicted gunshot wound.
19 hours ago
Federal Reserve Board Chairman Jerome Powell speaks during a news conference after a Federal Open M...
Christopher Rugaber, AP Economics Writer

Fed lifts rate by quarter-point and signals more hikes ahead

The Federal Reserve extended its fight against high inflation Wednesday by raising its key interest rate by a quarter-point, its eighth hike since March.
19 hours ago
Six-year-old Mason Stonehouse was playing on his dad’s phone before bedtime and spent about $1,00...
CNN

Michigan six-year-old orders $1,000 worth of food on Grubhub

A six-year-old as playing on his dad's phone before bedtime and spent about $1,000 on Grubhub orders.
19 hours ago
FILE - U.S. Secret Service agents are seen in front of Joe Biden's Rehoboth Beach, Del., home on Ja...
Eric Tucker, Colleen Long and Zeke Miller, Associated Press

Biden lawyer: FBI finds no classified docs at beach house

The Federal Bureau of Investigation searched President Joe Biden's vacation home in Rehoboth Beach, Delaware, on Wednesday without finding any classified documents, the president's personal attorney said.
19 hours ago
Soundgarden performs on stage for Guitar Hero game...
Mark Kennedy, Associated Press

Missy, Willie and George Michael among Rock Hall nominees

Missy Elliott, Willie Nelson, Kate Bush, Iron Maiden, Cyndi Lauper, Soundgarden, Sheryl Crow and the late George Michael are nominees for 2023 induction into the Rock & Roll Hall of Fame, a list that includes a mix of country, soul, hip-hop, metal, pop, rap-rock and grunge.
19 hours ago
Mourners sit next to a candle display during a vigil for Tyre Nichols at Regency Community Skatepar...
Aaron Morrison and Travis Loller, Associated Press

‘We’re all Tyre’: Family prepares to lay Nichols to rest

The family of Tyre Nichols plans to lay him to rest Wednesday, three weeks after he died following a brutal beating by Memphis police that was captured on disturbing video that prompted nationwide protests and renewed calls for police reform.
19 hours ago

Sponsored Articles

vintage photo of lighting showroom featuring chandeliers, lamps, wall lights and mirrors...
Lighting Design

History of Lighting Design | Over 25 Years of Providing Utah With the Latest Trends and Styles

Read about the history of Lighting Design, a family-owned and operated business that paved the way for the lighting industry in Utah.
Fiber Optical cables connected to an optic ports and Network cables connected to ethernet ports...
Brian Huston, CE and Anthony Perkins, BICSI

Why Every Business Needs a Structured Cabling System

A structured cabling system benefits businesses by giving you faster processing speeds and making your network more efficient and reliable.
notebook with password notes highlighted...
PC Laptops

How to Create Strong Passwords You Can Actually Remember

Learn how you can create strong passwords that are actually easy to remember! In a short time you can create new ones in seconds.
house with for rent sign posted...
Chase Harrington, president and COO of Entrata

Top 5 Reasons You May Want to Consider Apartment Life Over Owning a Home

There are many benefits of renting that can be overshadowed by the allure of buying a home. Here are five reasons why renting might be right for you.
Festive kitchen in Christmas decorations. Christmas dining room....
Lighting Design

6 Holiday Decor Trends to Try in 2022

We've rounded out the top 6 holiday decor trends for 2022 so you can be ahead of the game before you start shopping. 
Happy diverse college or university students are having fun on their graduation day...
BYU MBA at the Marriott School of Business

How to Choose What MBA Program is Right for You: Take this Quiz Before You Apply!

Wondering what MBA program is right for you? Take this quiz before you apply to see if it will help you meet your goals.
Musk puts Twitter buy ‘on hold,’ casting doubt on $44B deal