Elon Musk said on Friday he was putting a temporary halt on his much-anticipated deal to buy Twitter for $44 billion, sending shares in the social media giant plummeting.
“Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users,” the Tesla CEO said in a tweet.
The stunning announcement sent Twitter stock tumbling 20 percent in premarket trading, while Tesla — which Musk had proposed using to help fund the mega-deal — jumped 5 percent.
In his tweet, the billionaire included a link to a May 2 Reuters article quoting Twitter’s filing on Monday.
“Twitter Inc estimated in a filing on Monday that false or spam accounts represented fewer than 5% of its monetizable daily active users during the first quarter,” the Reuters article said.
It was unclear whether the fake account issue could scuttle the Twitter deal. Investors have had to weigh legal troubles for Musk, as well as the possibility that acquiring the platform could be a distraction from running the world’s most valuable automaker.
Wall Street investors now see a less than 50% chance that the deal closes, according to Dan Ives, an analyst at Wedbush. He added that Musk’s move amounts to a “Twitter circus show” since Wall Street will likely view this deal as “likely falling apart” or Musk negotiating for a lower deal price.”
Ives said that Musk could be trying to rearrange the financing of the deal so that he doesn’t have to be relying on leveraged shares of his electric car company, Tesla. Alternatively, Ives said that Musk could simply walk away from the deal and pay a $1 billion breakup fee.
“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,” he said.
On Thursday, Twitter said the company was pausing most hiring except for business-critical roles, adding in a statement that “we are pulling back on non-labor costs to ensure we are being responsible and efficient.”
A memo sent to staffers 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.
Musk slammed on the brakes a day after two Twitter honchos were fired.
Kayvon Beykpour, the company’s general manager, and Bruce Falck, Twitter’s head of revenue, announced that they were let go by Agrawal, who circulated a memo to employees Thursday announcing the departures.
Jay Sullivan, the head of consumer product, will take over Beykpour’s position.
Musk later tweeted that he was “still committed” to the deal.
Twitter has been thrown into turmoil since the company’s board of directors announced last month that it had accepted Musk’s $44 billion buyout offer.
He has said he intends to buy out shareholders and take the company private.
Musk has vowed to revamp the company’s content moderation policies that have resulted in bans of controversial figures, many of them on the political right.
Twitter has been fearful that employees could resign en masse ahead of Musk’s planned takeover, according to a regulatory filing that was submitted this week
On Tuesday, Musk told a Financial Times conference that Twitter’s decision to ban former President Donald Trump was “morally bad.”
He stressed Thursday on Twitter that he does not back Trump as a presidential candidate.
“Even though I think a less divisive candidate would be better in 2024, I still think Trump should be restored to Twitter,” he wrote.
The former president has said he does not want to return to Twitter, but instead wants to build up his own Truth Social platform.
He was banned from Twitter permanently in January 2021 because of the “risk of further incitement of violence” following the storming of the US Capitol, the company said then.
Trump is said to be considering another run for the White House in 2024.
With Post wires
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