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Elon Musk has revealed that he is pausing his Twitter acquisition to further investigate the number of spam accounts on the platform.
“Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users,” Musk tweeted.
Although Musk added he was “still committed to the acquisition,” the initial news drove Twitter’s shares down over 20% in premarket trading.
Musk cited Twitter’s quarterly financial report that was released at the end of April, in which the company estimated that less than 5% of its accounts were fake or spam. However, because the estimate was not independently verified, there is concern that this number is much higher.
Twitter has struggled with moderating spam accounts for years, and Musk stated that one of his goals as the owner of the social media platform would be to crack down on these fake accounts.
Murmurs of Musk walking away from the deal have emerged in recent weeks. If this happens, he will owe the company a $1 billion breakup fee.
“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,” said Dan Ives, tech analyst at Wedbush Securities. “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.”
Tech stocks have recently plummeted as the market remains volatile due to the ongoing war in Ukraine, post-pandemic attempts at recovery, and supply chain issues.
From the start, many Wall Street analysts were not convinced that Musk would be able to purchase the company at $54.20 per share, with forecasts coming in below $52 per share.
