Elon Musk says Twitter deal on hold pending details on fake accounts

Elon Musk, during an event at the SpaceX headquarters in Hawthorne, California, USA, on Thursday, October 10, 2019.

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Elon Musk announced on Friday that his Twitter contract is suspended until he receives more information about how many fake accounts there are on the social media platform.

In a follow-up tweet about two hours later, he added that he was “still committed to the acquisition.”

Twitter shares plunged 18% in premarket trading after the initial announcement, but trimmed some losses after the second tweet. A spokesperson for the social media company did not immediately respond to a CNBC request for comment.

Tesla CEO Musk announced last month that he intends to buy Twitter for $44 billion and previously tweeted that one of his top priorities would be removing “spam bots” from the platform.

Even before Friday’s announcement, the company’s market value had fallen to $9 billion below the offer price due to concerns about the deal.

Musk, who is expected to serve as Twitter’s temporary CEO if the deal goes through, would have to pay a $1 billion breakup fee if he decides to leave. Musk is worth more than $220 billion.

Twitter estimated in a presentation earlier this month that less than 5% of its monetizable daily active users during the first quarter were bots or spam accounts.

Musk, who is the world’s richest person on paper, now wants the company to confirm this before going ahead with the deal, which is being funded in part by Oracle founder Larry Ellison and venture capital firm Andreessen Horowitz.

The San Francisco-based social media company said in the filing that it had 229 million users in the first quarter who were served ads.

On Tuesday, Musk said he would lift Twitter’s ban against former President Donald Trump if he takes over the company.

“Permanent bans should be extremely rare and really reserved for accounts that are bots, or scams, spam accounts… I think it was wrong to ban Donald Trump,” Musk said at FT Live’s Future of the Car conference. “I think that was a mistake, because it alienated a large part of the country and ultimately didn’t result in Donald Trump having no voice.”

Earlier this month, Bill Gates warned that Musk could make Twitter “worse.” Speaking at The Wall Street Journal’s CEO Summit, Gates said it’s unclear how Musk will change Twitter if he takes ownership while also expressing concern about misinformation being spread on social media platforms.

Gates went on to question what Musk’s goal is with Twitter and whether his push to promote free speech is sensible. “What are his goals for what it ends up being? Does it match this idea of ​​less extreme falsehoods spreading so quickly [and] weird conspiracy theories? Do you share that goal or not?” Gates said.

Before Musk made his offer to buy Twitter outright, he failed to disclose a more than 9% stake in the company within the SEC’s 10-day mandated deadline.

The Information reported that the Federal Trade Commission is investigating the timing of Musk’s disclosure. Bloomberg later said the FTC is reviewing the acquisition itself separately, though many experts don’t expect the deal to raise antitrust concerns.

The FTC does not disclose ongoing investigations, and an FTC spokesman declined to comment.

Tesla stock price rose 7% in premarket trading on Friday.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said some may be wondering if fake accounts are the real reason behind this delaying tactic.

“The $44 billion price tag is huge, and may be a strategy to push back on the amount you’re willing to pay to acquire the platform,” he said in a statement.

Additional reporting from CNBC’s Lauren Feiner.

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