When I was talking Thursday with a Wall Street analyst roger kay about the instability of Elon MuskThe $44 billion Twitter takeover, noted that “you really don’t know what to expect from it.” According to that analysis, at 5:44 a.m. Friday, Musk alerted his 92.8 million Twitter followers that his bid for the social media giant was “temporarily on hold pending details to support the calculation that spam/fake accounts account for less than 5% of users” .
Musk freezing the deal came as no surprise to Wall Street, though his stated justification was unexpected. With shares of Tesla and Twitter taking huge hits this week, analysts have questioned the viability of the deal and predicted that Musk might renegotiate the offer for him. Concerns about spam and fake accounts on the platform were not an issue forecasters mentioned when noting why Musk might pull out.
The announcement, which marked another unexpected twist in the ordeal, was followed two hours later by Musk’s insistence that he was “still committed to [the] acquisition.” In his initial tweet, Musk pointed to a line in Twitter’s quarterly financial report that estimates that for the first three months of 2022, less than 5% of the platform’s active users were fake or spam accounts. It’s unclear why Musk suddenly raised this concern now, as the estimate was revealed 11 days ago.
Kay, the founder and chairman of Endpoint Technologies Associates, explained to me on Thursday that there are ways Musk “invokes clauses that would cause the deal to fall apart” if he thinks Twitter’s board of directors “are somehow not acting in good faith.” “. Kay also noted that he “wouldn’t be so surprised if [Musk] he suddenly reconfigures his offer and lowers it.” If Musk were to abandon the acquisition, he would be required to pay a $1 billion breakup fee, according to the deal he made with Twitter’s board of directors last month. But he could try to get around that fee by accusing Twitter of reporting incorrect user estimates.
On Friday, Wedbush managing director and analyst Daniel Ives noted how some might believe Musk is “using these Twitter archive/spam accounts as a way to get out of this deal in a very fast-moving market.” Ives, who made the observation in a note to investors, went on to write that “the nature of Musk creating so much uncertainty in a tweet (and not a presentation) is very concerning to us…and now he turns this whole thing into a circus.” show with many questions and no concrete answers about the path of this agreement in the future”.
Twitter shares immediately felt the effects of Musk’s announcement, losing more than 8% on Friday morning.