Musk says Twitter deal on hold, shares tumble
Twitter shares tanked on Friday after Elon Musk said his takeover of the social media company was on hold until he gets more information on fake accounts.
The Tesla owner said in a Tweet: "Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users."
The tweet contained a link to a Reuters article about fake accounts. If Musk pulls out of the deal, he will have to fork out a $1bn termination fee.
Musk tweeted again later in the day that he was "still committed" to the acquisition.
At 1535 BST, the shares were down 9.4% at $40.80.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: "Musk’s Twitter takeover was always destined to be a bumpy ride, and now it risks hitting the skids over the number of fake accounts on the platform. Twitter’s share price plunged by around 18% in pre-market trading following his tweet indicating the deal was temporarily on hold.
"He is clearly intent in querying the company’s estimate that spam accounts make up less than 5% of active daily users – a key metric given that establishing an accurate number of real tweeters is considered to be key to future revenue streams via advertising or paid for subscriptions on the site. This is likely to come as highly frustrating for many in the company given that a number of senior executives have already been laid off in expectation of the takeover and the change in direction he was expected to pursue.
"There will also be questions raised over whether fake accounts are the real reason behind this delaying tactic, given that promoting free speech rather than focusing on wealth creation appeared to be his primary motivation for the takeover. The $44 billion price tag is huge, and it may be a strategy to row back on the amount he is prepared to pay to acquire the platform."
CMC Markets analyst Michael Hewson said: "The timing does seem curious given the lengths Musk has gone with respect to putting financing in place, after all why go to all that trouble securing secondary financing only to pull the plug at the last minute?
"Of course, if Musk feels the deal doesn’t work for him then he will have to pay a $1bn break clause which will probably sting a bit, but he’ll probably view it as a cheap cut, especially since Musk made his bid for Twitter, Tesla shares have fallen over 20%. This fall in value potentially cuts his wriggle room in funding the deal from the value of his Tesla shares."