Elon Musk said his $44 billion cash deal for Twitter Inc (TWTR.N) was “temporarily on hold” while he waits for the social media company to provide data on the percentage of fake accounts.
In premarket trading, Twitter shares fell more than 20%, but they recovered some ground after Musk, the CEO of electric carmaker Tesla Inc (TSLA.O), sent a second tweet saying he was still committed to the deal.
The stock dropped 9.6% to $40.71 in Friday trading, a significant discount to the $54.20 per share purchase price.
Musk, the world’s richest man, agreed to buy Twitter on April 25 without conducting due diligence in order to persuade the San Francisco-based company to accept his “best and final offer.” This could make it more difficult for him to claim that Twitter misled him.
Technology stocks have plummeted since Musk announced his acquisition of Twitter, owing to investor concerns about inflation and a potential economic slowdown.
As investors speculated that the downturn would prompt Musk to walk away or seek a lower price, the spread between the offer price and the value of Twitter shares had widened in recent days, implying less than a 50% chance of completion.
“Twitter deal on hold temporarily pending details supporting calculation that spam/fake accounts represent less than 5% of users,” Musk told his 92 million Twitter followers.
“To find out,” Musk tweeted, “my team will do a random sample of 100 followers” on the microblogging site, inviting others to “see what they discover.”
“We can probably crowdsource a good answer if we try to figure out the bot/duplicate user percentage as a group.”
Musk responded to a follower who asked why he hadn’t considered this before offering to buy Twitter by tweeting that he had “relied upon the accuracy of Twitter’s public filings.”
Musk has the right under the terms of his contract with Twitter to request information on the company’s operations after the deal is signed.
However, this is intended to assist him in preparing for his ownership of Twitter, not to conduct due diligence or reopen negotiations.
According to people familiar with the situation, Twitter has no immediate plans to take action against Musk as a result of his comment.
“We can probably crowdsource a good answer if we try to figure out the bot/duplicate user percentage as a group.”
The company found the remark demeaning and in violation of the terms of their deal contract, but was encouraged when Musk later tweeted that he was committed to the acquisition, according to the sources.
Musk visited Twitter’s offices on May 6 for a meeting as part of the transaction planning process, according to a Twitter spokesperson.
“While I expect the deal to close,” Twitter CEO Parag Agrawal tweeted, “we need to be prepared for all scenarios.” Agrawal announced leadership changes and a hiring freeze on Thursday.
