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Musk Declares $44 Billion Twitter Takeover ‘On Hold’
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Musk Declares $44 Billion Twitter Takeover ‘On Hold’

Elon Musk tweeted that his $44 billion takeover of Twitter Inc. is “temporarily on hold” until the billionaire receives more information about the proportion of fake accounts, sending the social media giant into a tailspin.

Business

Elon Musk tweeted that his $44 billion takeover of Twitter Inc. is “temporarily on hold” until the billionaire receives more information about the proportion of fake accounts, sending the social media giant into a tailspin.

Twitter slumped 20% in pre-market trading after Musk tweeted Friday that the deal was suspended, pending details on a recent filing from Twitter that fake accounts on the social media platform contributed less than 5% of its users. Tesla Inc. shares rose roughly 5%.

Twitter said in its latest quarterly results “that the average of false or spam accounts during the first quarter of 2022 represented fewer than 5% of our monthly daily active users during the quarter.” However, Twitter said it applied “significant judgment” to its latest estimate, and the true number could be higher.

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Fighting fake accounts has been a cornerstone of Musk’s bid to reform Twitter. In a statement announcing his deal to buy the company last month, he revealed he wanted to defeat spam bots, authenticate all humans, and make its algorithms open source. Musk has also said he’d like to make the platform a bastion of free speech, taking the guardrails off of content moderation.

Bots are currently allowed on Twitter, though under the company’s policy such accounts are supposed to indicate that they’re automated. The platform has even launched a label for “good” bots, such as @tinycarebot, an account that tweets self-care reminders. Spam bots, however, are not permitted, and the company has policies meant to combat them.

Doubts have grown in recent days that Musk would be able to pull off his acquisition of Twitter, and that the entrepreneur may consider dropping his bidding price for the micro-blogging site.

“There will also be questions raised over whether fake accounts are the real reason behind this delaying tactic,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, “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.”

The proposed takeover includes a $1 billion breakup fee for each party, which Musk will have to pay if he ends the deal or fails to deliver the acquisition funding as promised. It is unclear whether an update by Twitter on the number of fake accounts -- if materially larger than 5% -- would trigger a so-called material adverse effect clause, releasing Musk from the breakup fee.

The spread on the deal, which offers an indication of how much Wall Street believes the takeover will be completed, swelled further on Thursday to $9.11 from $8.11 in the previous session. That was the widest level since the billionaire launched his bid last month to purchase the Twitter for $54.20 -- and double where it was last week when he announced a roughly $7.1 billion financing commitment.