Elon Musk Has Put The Twitter Deal On Hold Over “Fake Accounts”

Elon Musk has put has put his Twitter bid on hold pending investigation into “fake accounts”. Elon Musk made a $44b bid for the microblogging site and has raised money from selling his shares and from other investor sources.

This made Twitter shares fall as much as 13% on Friday as investors await a decision from the richest man in the world. He said in a tweet that “Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users.”

In its quarterly financial report, released on April 28, Twitter estimated that fake or spam accounts made up fewer than 5% of the platform’s active users during the first three months of the year. Twitter noted that the estimates were based on a review of sample accounts and it believed the numbers to be “reasonable.”

According to a CNN report,

Musk turned “this Twitter circus show into a Friday the 13th horror show,” wrote tech analyst Dan Ives of Wedbush Securities in a note to clients early Friday.

Musk would owe Twitter a $1 billion breakup fee if he were to cancel the deal.

“The Street will view this deal as 1) likely falling apart, 2) Musk negotiating for a lower deal price, or 3) Musk simply walking away from the deal with a $1 billion breakup fee,” Ives wrote. “Many will view this as Musk using this Twitter filing/spam accounts as a way to get out of this deal in a vastly changing market.”

Adding to the circus-like mood Friday morning, Musk sent a follow-up tweet that said: “Still committed to acquisition.”

Stocks — tech in particular — have been sharply lower since Musk and Twitter reached a deal on a purchase of the company nearly three weeks ago.

You see why investors may be worried. Many have questioned Elon Musk’s ability to turn around the fortunes of Twitter with him even putting forward ideas like charging corporations and governments a fee to tweet. He was reported to have floated the idea of cutting about 1,000 people from the Twitter workforce.

These were not enough to show that he had the capacity to make Twitter a profitable company. But the news of Musk taking over the company has sent Twitter shares upwards in the last month but with the news that he may eventually back out, Twitter shares have started suddenly sinking again.

Analysts have since believed that Twitter at $54.20 a share was on the high side even for Elon Musk, hence the scepticism. In any case, if he decides to pull the deal now, he will pay $1 billion to Twitter which may be a safer bet than $44b in Twitter that some analysts describe as toxic.

He has indicated that he would reverse the Trump Twitter ban and this has not been welcome by many users unless for some followers of the former President.

The worry is that Elon Musk would eventually turn the site into a circus because of his “free speech” ideas. Many on the right have openly celebrated Musk buying the platform and potentially allowing Trump (accused of being the mastermind of the attack on the US capitol) back while some on the left think it is ultimately a bad idea.

Whatever happens, Elon Musk is likely to not enjoy his new addition at least in the short term because of the many challenges facing Twitter with respect to user growth and revenue.