Elon Musk’s Twitter acquisition bid has suffered a setback after the entrepreneur questioned the actual number of users on the platform. The Tesla CEO said on Tuesday that his $44-billion offer would not move forward until Twitter shows proof that spam bots account for less than 5% of its total users.
“My offer was based on Twitter’s SEC filings being accurate. Yesterday, Twitter’s CEO publicly refused to show proof of <5% (spam accounts). This deal cannot move forward until he does,” Musk said in a tweet.
20% fake/spam accounts, while 4 times what Twitter claims, could be *much* higher.
My offer was based on Twitter’s SEC filings being accurate.
Yesterday, Twitter’s CEO publicly refused to show proof of <5%.
This deal cannot move forward until he does.
— Elon Musk (@elonmusk) May 17, 2022
The latest turn of events has sent the shares of Twitter crashing and has also ignited a sort of revolt from the company’s employees. Some executives said in leaked videos shared on Twitter that the platform was never about free speech and that has hindered its growth.
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Musk’s aim in pushing for audit to determine the actual number of Twitter users will likely change the $54.20 per share acquisition cost. Musk said he suspected that spam bots account for at least 20% of users compared with Twitter’s official estimate of 5%.
“You can’t pay the same price for something that is much worse than they claimed,” he said on Monday at the All-In Summit 2022 conference in Miami.
Asked if the deal is viable at a different price, Musk said, “I mean, it is not out of the question. The more questions I ask, the more my concerns grow.”
“They claim that they have got this complex methodology that only they can understand… It cannot be some deep mystery that is, like, more complex than the human soul or something like that.”
Musk made a bid for Twitter acquisition on the pledge that he will promote free speech and turn the company’s fortune around. The pledge is now facing its most challenging hurdle so far.
Twitter Chief Executive Parag Agrawal made some tweets in response to Musk’s criticisms on Monday, explaining that internal estimates of spam accounts on the social media platform for the last four quarters were “well under 5%.”
“Twitter’s estimate, which has stayed the same since 2013, could not be reproduced externally given the need to use both public and private information to determine if an account is spam,” Agrawal said.
Musk was not satisfied with the response and tweeted a poop emoji. “So how do advertisers know what they’re getting for their money? This is fundamental to the financial health of Twitter,” he wrote.
Musk’s growth plan is expected to more than double Twitter users and revenue. He expects total number of Twitter users to grow to nearly 600 million in 2025 and to 931 million in six years from now.
However, there is growing belief that Musk has paused the deal to get a lower price that will commiserate with the current volume of Twitter users or the social media company’s current value. Twitter traded at around $35, lower than the $54.20 Musk offered.
Toni Sacconaghi, an analyst at Bernstein, told CNBC that Musk putting the deal on hold was “probably a negotiation tactic” amid a broad sell-off in tech stocks, an assessment several other analysts have come to agree with. Some said that Musk could be trying to push for a lower price while others suggest his claim about spam bot could be a pretext to abandoning the deal altogether.
“Unless Twitter grossly misreported data which would be a serious security fraud this might be a way to either negotiate a lower price or walk away,” Stefano Bonini, corporate governance expert at Stevens Institute of Technology, told the Financial Times. Two analysts also told the FT they believed Musk was trying to leverage a better price.
Two research groups, SparkToro and Followerwonk, said a joint audit they conducted shows that Elon Musk’s Twitter followers are likely 23% fake or spam accounts. Apart from Musk, other Twitter users with big followership are also said to be affected. Nearly half of US President Joe Biden’s followers is said by the audit to be fake.
If the audit is anything to go by, Musk may likely pull out of the Twitter deal or ask for a lower price. He is funding part of the deal with a $12.5 billion loan he used his Tesla stock to secure. But Tesla’s stock price has dived more than 20% since he announced his bid and Twitter said on Friday that it’s committed to completing the deal only at the agreed price and terms. In addition, a clause in the deal allows Musk to walk away only if he pays a $1 billion exit fee.