Elon Musk says his deal to buy Twitter is on hold - CNN
May 13, 2022 2 mins, 38 secs
"Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users," Musk tweeted on Friday.

The news initially sent Twitter shares down more than 20% in pre-market trading before the stock rebounded somewhat. Two hours after his first tweet, Musk posted that he is "still committed to acquisition."

In his tweet about putting the deal on hold, Musk linked to a May 2 Reuters report about Twitter's most recent disclosure about its spam and fake account problem.

In its quarterly financial report, released on April 28, Twitter estimated that fake or spam accounts made up fewer than 5% of the platform's active users during the first three months of the year. Twitter noted that the estimates were based on a review of sample accounts and it believed the numbers to be "reasonable."

But it acknowledged that the measurements were not independently verified and the actual number of fake or spam accounts could be higher.

Twitter has had a spam problem for years, and the company has previously acknowledged that reducing fake and malicious accounts would play a key factor in its ability to keep growing. It's unclear why Musk would back away from the deal because of the latest disclosure.

A 'circus'

Musk turned "this Twitter circus show into a Friday the 13th horror show," wrote tech analyst Dan Ives of Wedbush Securities in a note to clients early Friday.

Musk would owe Twitter a $1 billion breakup fee if he were to cancel the deal.

"The Street will view this deal as 1) likely falling apart, 2) Musk negotiating for a lower deal price, or 3) Musk simply walking away from the deal with a $1 billion breakup fee," Ives wrote.

"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."

Stocks — tech in particular — have been sharply lower since Musk and Twitter reached a deal on a purchase of the the company nearly three weeks ago.

Flouting convention

The manner in which Musk announced the deal's pause — in a tweet -— was also unusual, at least by normal corporate merger and acquisition standards.

Musk, Tesla's CEO, was planning to borrow against part of his Tesla stake to finance the deal, but Tesla's stock has been sinking fast alongside most other stocks this year.

Musk's sale of a significant number of Tesla shares to help finance his Twitter deal had also put pressure on the carmaker's stock.

Having already committed a big chunk of his Tesla shares elsewhere, he wasn't left with much of a cushion should he need to pony up more funds to complete the Twitter takeover.

Ives said the news about the Twitter deal was good for Tesla (TSLA) shares, which roared 6% higher in premarket trading Friday.

Shares of Tesla, the world's most valuable automaker, have lost about a third of their value since Musk disclosed he had taken a stake in Twitter.

In addition to selling $8.5 billion of his Tesla shares last month, or about 6% of his holdings, Musk was using his shares of Tesla as part of the collateral he needed to raise cash for the Twitter purchase.


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