Twitter deal is on hold for the time being

Dusseldorf Elon Musk’s $44 billion takeover of Twitter is on hold. The Tesla boss announced this on Friday on the short message platform Twitter and justified this with the lack of information on the number of spam and false accounts with the short message service from the USA. It must first be proven that these accounted for less than five percent of the users. The company itself could not be reached for comment.

Just hours after his tweet, Musk backtracked: “I still stand by the acquisition,” he wrote in response to his initial tweet. The reaction of the markets was turbulent: After Musk’s first tweet, Twitter shares lost around 14 percent in premarket trading and were quoted at around $34.50.

“Elon Musk is turning the deal into a circus show,” said Wedbush Securities analyst Dan Ives. Above all, he criticized Musk for causing “so much uncertainty with a tweet”. The correct way would have been a mandatory notification to the stock exchange supervisory authority.

Again, it suits Musk that he publicly voices his concerns. In the past, the entrepreneur has often been very casual about publishing important business details. That had already brought him trouble with the US Securities and Exchange Commission. Nevertheless, in this case the question arises as to which strategic goal Musk is pursuing.

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Officially, the 50-year-old Tesla boss refers to the proportion of spam and false accounts in the short message service. Twitter recently estimated this at less than five percent of daily active users. Musk wants proof that the number is correct.

Now it could be revenge that Musk wanted to go through with the deal quickly and therefore refrained from the usual audit of Twitter’s balance sheets. Market participants speculate that Musk wants to push the takeover price down. “$44 billion is a lot of money,” said Susannah Streeter, analyst at Hargreaves Lansdown, “it can be a strategy to lower the figure.”

Because the existence of fake accounts on Twitter is nothing new. With his takeover bid, Musk had already stated the goal of banning suspected spam accounts from the platform. Their number is disputed: According to Twitter, less than eleven million of a total of 229 million users are doubtful. The company published the number almost two weeks ago in a stock exchange notification.

Apparently, Musk has since looked into the matter more closely or received hints that the number of spam and fake accounts could be higher. Most recently, Twitter had to admit that it had reported slightly inflated user numbers since 2019 due to an error. The deviation is said to have been limited to a maximum of two million accounts.

The boss of the electric car manufacturer Tesla had recently agreed on a deal with the Twitter board of directors. But he is still dependent on enough shareholders wanting to sell him their shares. Twitter and Musk actually wanted to complete the acquisition by the end of the year. That’s why Musk had already acquired nine percent of Twitter’s shares on the stock exchange in the past few months.

Twitter and Musk have both agreed to a $1 billion fine if either side cancels the deal. If there are significantly more spam accounts than five percent, Musk could point to the “adverse effect” clause, which allows him to get out of the deal without paying. But experts aren’t sure if the number of fake accounts is one constitutes a sufficient “adverse effect” on the buyer.

Tesla stock soared after Musk tweet

However, the possible end for the Twitter takeover triggered a relief rally at Tesla. The papers rose in the pre-market US business by a good six percent and are heading for the largest daily gain in almost two months. Stockbrokers fear Musk would have to sell a significant portion of his Tesla stake to fund the Twitter takeover.

Musk originally wanted to borrow around $12 billion of the purchase price, which would be secured with his Tesla shares. But after Tesla’s share price plummeted from around $1,000 to just $728, the plan became increasingly unfavorable to him. Financial service Bloomberg reported on Thursday that Musk is looking for alternative sources of funding instead of the equity-backed loan.

However, it is also possible that the latest tweet is just another joke by the richest person in the world. Because Musk tends to play numbers. For example, the takeover price of $54.20 per share bears the number code “420” — a reference to marijuana. The tweet came at 3 a.m. California time – early in the morning on Friday the 13th.

With agency material

More: Musk accepts the EU’s strict rules for content – and wants to bring Trump back to Twitter.


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