Elon Musk suspends plans to take over Twitter

The boss of Tesla wants to make sure that the platform does not contain more than 5% of fake accounts.

Elon Musk announced on Friday that his planned $44 billion takeover of Twitter was on hold pending clarification of fake accounts and spam.

“The agreement is temporarily on hold pending details regarding calculations that fake accounts and spam actually account for less than 5% of users,” the businessman said.

The action of the group, listed on the New York Stock Exchange, plunged about 15% after this announcement in electronic trading before the opening of Wall Street. It had tumbled 25% earlier in the day.

The board of directors of the social network accepted at the end of April a takeover offer of 44 billion dollars formulated by the whimsical leader of South African origin. Elon Musk promised to rid Twitter of spam, authenticate users and increase transparency without specifying how he intended to implement this project.

Why knowing the number of fake accounts is important

The company indicated at the beginning of May, during the presentation of its quarterly results, to count, on average from January to March, 229 million daily users said to be monetizable, that is to say exposed to advertising.

She had estimated on this occasion that less than 5% of them were spam or fake accounts.

The proportion of fake accounts is “a key indicator” for Twitter, explains Susannah Streeter, market analyst for Hargreaves Lansdown, because “calculating the precise number of people who actually tweet is considered crucial for future revenue streams through advertising or paid subscriptions on the site.”

In addition to his desire to fight spam, Elon Musk said he wanted to make Twitter a bastion of freedom of expression and said he was ready to reinstate former US President Donald Trump, whose account was permanently suspended after the attack on the Capitol in January 2021.

Since the takeover bid by the boss of Tesla and SpaceX, Twitter’s stock market value has shrunk by billions of dollars. The title traded on Friday at just over $38, well below the purchase price of $54.20 per share proposed by the billionaire.

Wall Street is shaking

Wedbush Securities’ Dan Ives said Elon Musk’s latest tweet “will turn the Twitter takeover circus into a Friday the 13th horror movie.”

“Wall Street will now assess 1) the deal is about to fall through 2) it’s an attempt by Musk to negotiate a lower purchase price or 3) Musk simply wants to get out of the transaction with a severance fee of $1 billion,” the analyst said in a note.

The leader had however sought to reassure on his ability to finance the operation, planning to have recourse to a considerable personal contribution and to request a bank loan as well as a loan on margin in which he would pledge his Tesla shares as collateral.

Earlier this month, Elon Musk claimed to have raised just over $7 billion from various investors, Oracle co-founder Larry Ellison and Saudi prince and businessman Al-Walid bin Talal.

But for Dan Ives, the entrepreneur has overestimated the strength of his Tesla shares, whose price has fallen sharply since the announcement of the takeover of Twitter, and could seek to protect the manufacturer of electric vehicles.

“The fact that Musk is creating such uncertainty with a tweet (and not a stock document) is very disturbing for us and for Wall Street” and raises “many questions but no concrete answers as to whether the transaction will take place” .

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