Tesla and Space X’s CEO Elon Musk
On Friday, Tesla and Space X’s billionaire CEO Elon Musk announced that his deal to buy social media company Twitter for $44 billion is on hold pending when he receives information on the number of fake accounts that exist on the social media platform.
Following the announcement, Twitter’s shares plunged 18 percent. The company’s market value had dropped to $9 billion before the Friday announcement came. The declines that the company has suffered so far are all associated with the $44 billion bid by Elon Musk.
Twitter is yet to comment about the Elon Musk announcement.
Elon Musk who offered to buy Twitter for $44 billion last month made it very clear that he intends to remove spambots on the platform. He also mentioned quite a list of other changes that he intends to bring to the platform especially enforcing free speech. This week, Elon Musk said that he would reverse Twitter’s ban on former President Donald Trump once his deal to acquire Twitter is completed. Speaking at the Financial Times Live’s Future of the Car Conference, the billionaire said that “Permanent bans should be extremely rare and really reserved for accounts that are bots, or scam, spam accounts… I do think it was not correct to ban Donald Trump. I think that was a mistake because it alienated a large part of the country and did not ultimately result in Donald Trump not having a voice.”
In a filing by Twitter earlier this month, it estimated that about 5 percent of its monetizable daily active users in the first quarter of this year were bots or spam accounts. Elon Musk, therefore, wants the company to confirm this before he proceeds to complete the Twitter deal. The social media company added in the filing that it had 229 million users in the first quarter.
On Monday, Hindenburg Research, an investment research firm said that Twitter may not receive a bid as good as Elon Musk’s if the billionaire and Tesla CEO decides to back down from his $44 billion deal with the company. “Musk holds all the cards here,” the research firm which holds a short position on Twitter said in a recent report adding that “If Elon Musk’s bid for Twitter disappeared tomorrow, Twitter’s equity would fall by 50% from current levels. Consequently, we see a significant risk that the deal gets repriced lower.”
Elon Musk will be required to pay Twitter a termination fee of $1 billion if he can’t secure funding for his bid. Twitter will also have to pay Elon Musk $1 billion in breakup fee if the company decides not to go through with the deal as a result of another offer.