Elon Musk’s Acquisition Of Twitter In ‘Serious Jeopardy’ – Report

Investors are fretting over Twitter, after it was reported that the planned takeover of the microblogging platform by Elon Musk is in “serious jeopardy”.

The share price of Twitter fell 4.2 percent to $37.16 in after-hours trading on Wall Street, amid growing concern over Musk’s $44 billion takeover attempt.

Since that acquisition offer, Musk has clashed with Twitter’s board of directors over his concern about the number of bots, or fake accounts of the platform.

Tesla chief executive Elon Musk opens Gigafactory in Texas. Image credit: Tesla

Serious jeopardy

Twitter in April had said that less than 5 percent of Twitter users are spam or fake accounts.

Musk however believes the true figure of fake or bot accounts is closer to 20 percent or more, but critics believe he may be using this bot issue so as to renegotiate the deal below his $54.20 percent offer.

Twitter this week defended its spam policy and said it suspends more than 1 million spam accounts a day, up from it when CEO Parag Agrawal, said in May that spam account suspensions were running at 500,000 a day.

Twitter reportedly has a specialist team and automated processes dedicated to weeding out fake accounts, and last month it began providing access for Musk to the colossal firehose of public tweet data.

But that has still failed to satisfy Elon Musk, and now the Washington Post has reported that the Twitter acquisition is in peril.

The Washington Post, citing three anonymous sources, reported that the Elon Musk’s camp has “stopped engaging in certain discussions around funding” for the agreement.

The report said Musk had concluded that Twitter’s figures on spam accounts were not verifiable.

The report said a “change in direction” from Musk was likely to come soon, indicating that he will follow through on threats to attempt to walk away from the agreed deal.

Legal, financial implications

If Elon Musk does decide to walk away from the Twitter takeover, it could prove expensive.

In the agreement he signed, Musk can only back out if something major happens to Twitter’s business.

There is doubt that Twitter’s bot issue may be enough of a justification.

However, signs of a legal strategy for backing out emerged last month when Musk’s lawyers sent a letter to Twitter warning that a refusal to co-operate over the spam account issue represented a “material breach” of the agreement.

Twitter could also demand a $1 billion (£836m) breakup fee from Musk if he attempts to renege on the agreement.

Twitter’s board meanwhile has previously warned Musk it will ‘enforce’ the takeover deal.

Yet the deal dispute has taken its toll on Twitter itself, with executive resignations, hiring freezes, and cost cutting exercises.

The Wall Street Journal reported this week that Twitter has let go around 30 percent of its talent acquisition team (less than 100 staff).

“Twitter has and will continue to cooperatively share information with Mr Musk to consummate the transaction in accordance with the terms of the merger agreement,” a Twitter spokesperson told the Guardian.

“We believe this agreement is in the best interest of all shareholders. We intend to close the transaction and enforce the merger agreement at the agreed price and terms.”

Tom Jowitt

Tom Jowitt is a leading British tech freelancer and long standing contributor to Silicon UK. He is also a bit of a Lord of the Rings nut...

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