Musk says US$44b Twitter deal on hold over fake account data
Elon Musk tweeted on Friday that his US$44-billion cash deal for Twitter Inc was "temporarily on hold" while he waits for the social media company to provide data on the proportion of its fake accounts.
Twitter shares initially fell more than 20 percent in premarket trading, but after Musk, the chief executive of electric car market Tesla Inc, sent a second tweet saying he remained committed to the deal, they regained some ground.
The shares were down 9.6 percent to US$40.71 in trading on Friday, a steep discount to the US$54.20 per share acquisition price.
Musk, the world's richest person, decided to waive due diligence when he agreed to buy Twitter on April 25, in an effort to get the San Francisco-based company to accept his "best and final offer." This could make it harder for him to argue that Twitter somehow misled him.
Since Musk inked his deal to acquire Twitter, technology stocks have plunged amid investor concerns over inflation and a potential economic slowdown.
The spread between the offer price and the value of Twitter shares had widened in recent days, implying less than a 50 percent chance of completion, as investors speculated that the downturn would prompt Musk to walk away or seek a lower price.
"Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5 percent of users," Musk told his more than 92 million Twitter followers.
"To find out, my team will do a random sample of 100 followers" of the microblogging site, Musk tweeted, inviting others to repeat the process and "see what they discover."
"If we collectively try to figure out the bot/duplicate user percentage, we can probably crowdsource a good answer."
Musk tweeted he had "relied upon the accuracy of Twitter's public filings" in reply to a follower who asked why he had not thought of this before offering to buy the company.
Under the terms of Musk's contract with Twitter, he is entitled to ask the company for information on its operations following the signing of the deal.
But this is meant to help him prepare for his ownership of Twitter, not to carry out due diligence and reopen negotiations.
Twitter is planning no immediate action against Musk as a result of Musk's comment, people familiar with the matter said.
The company considered the comment disparaging and a violation of the terms of their deal contract, but was encouraged by Musk subsequently tweeting he was committing to the acquisition, the sources added.
Musk came to Twitter's office for a meeting on May 6 as part of the transaction planning process, a Twitter spokesperson said.
Twitter CEO Parag Agrawal also weighed in, tweeting "While I expect the deal to close, we need to be prepared for all scenarios." On Thursday, Agrawal announced leadership changes and a hiring freeze.