The saga of Elon Musk and Twitter, Inc. (TWTR) continues. The billionaire CEO of Tesla, Inc. (TSLA) sent Twitter shares tumbling when he tweeted on Friday, May 13, that his planned $44-billion purchase of the social media giant was "temporarily on hold." Musk said the deal would be paused pending confirmation that spam or fake accounts on Twitter represent under 5% of users. Twitter shares initially dropped by over 20% in pre-market trading following Musk's announcement.
Musk sent a follow-up tweet later in the day saying that he was "still committed" to the acquisition, nudging Twitter shares back up slightly.
- Elon Musk tweeted on the morning of Friday, May 13, that his bid to buy Twitter was "temporarily on hold" pending additional information about Twitter's spam and fake accounts.
- Reuters recently reported that Twitter believes under 5% of its monetizable active accounts in Q1 were spam or fake.
- Twitter shares plunged by about 20% in pre-market trading following Musk's announcement.
- Musk followed with a second tweet saying he is "still committed" to the deal; Twitter shares recovered slightly but are still down significantly for the day.
Due Diligence and Tech Turmoil
When Musk, the richest person in the world, agreed to buy Twitter on April 25, he waived due diligence on the company. Reuters reported in early May that Twitter estimated under 5% of its 229 million monetizable daily active users for Q1 were fake or spam accounts. Musk linked to the Reuters report in his tweet calling for a pause on the acquisition.
Twitter, like many other big tech companies and even Musk's own Tesla, has seen stock prices fall dramatically in recent weeks. Tesla shares have fallen close to 30% over the past month, possibly related to Musk's reported plans to borrow against his Tesla stake in order to fund the purchase of Twitter. Twitter is currently trading at $40.60 per share, well below Musk's offer of $54.20 made on April 25. Shares of the social media giant have fallen by about 25% since April 25.
Impact for Investors
As the spread between Musk's offer price and the current price of Twitter shares has widened, investors may grow increasingly doubtful that Musk will complete the deal as originally planned. It is possible that his announcement about putting the deal on hold is an attempt to either walk back the original deal or to convince the Twitter board to settle for a lower price. The impact of the highly publicized and protracted negotiations between Twitter and Musk is exacerbated by the broader slowdown across the tech industry, as well as looming concerns about inflation.
What Is the Latest With Musk's Twitter Deal?
Early on Friday, May 13, Elon Musk tweeted that his acquisition of Twitter was temporarily on hold pending more information about the social media platform's spam and fake account rates.
Will Musk's Twitter Buy Go Through?
Musk said that he remains committed to acquiring Twitter, but the price of shares dropped significantly following his announcement. This could signal investor skittishness about the deal.
What's the Issue With Twitter's Fake Accounts?
Musk's tweet referenced an early-May news item claiming that Twitter said under 5% of its monetizable active accounts are fake or spam. This percentage is key because it could have an impact on Twitter's ad revenue.