Elon Musk said he’s putting his $20 million deal to buy a controlling stake in the social media company on hold, following backlash from Twitter users. The decision comes after public outcry over the CEO potentially using his influence to block critics or silence dissenters.
Elon Musk has put his takeover of Twitter on hold. This is due to the recent backlash that he has received, and the lack of support from other potential investors. Read more in detail here: elon musk his takeover twitter on.
Mr. Musk tweeted early Friday morning from his verified Twitter account, “Twitter deal currently on hold awaiting details supporting computation that spam/fake accounts do fact comprise fewer than 5% of users.” The Tesla Inc. TSLA 4.66 percent CEO cited such figures in a Reuters article from May 2 concerning a recent Twitter securities filing.
“Still committed to acquisition,” he wrote two hours later.
In morning trading, Twitter shares plunged 10% to $40.60, much below the $54.20 per share, or $44 billion, that Mr. Musk agreed to pay for the firm last month. After Mr. Musk’s initial tweet, the stock was down more than 20% in premarket trade.
A request for comment from Twitter was not immediately returned.
The comments come as several major tech companies have been losing ground on Wall Street, including Tesla, which has lost 29% in the last month through Thursday. Mr. Musk is funding the Twitter transaction with his Tesla assets. Meanwhile, Twitter’s stock price had fallen below Mr. Musk’s bid price as investors speculated on whether the transaction would be revised or canceled.
The comments come as several major tech companies have been losing ground on Wall Street, notably Tesla, which has lost 29% in the last month. Mr. Musk is funding the Twitter transaction with his Tesla assets. Meanwhile, Twitter’s stock price had fallen below Mr. Musk’s bid price as investors speculated on whether the transaction would be revised or canceled.
According to Daniel Ives, a technology analyst at Wedbush Securities, Mr. Musk may be leveraging Twitter’s latest announcement to get out of or renegotiate the acquisition. The effect on Tesla stock since the agreement was disclosed is one factor.
Mr. Ives said, “Leveraging his shares and prospective Tesla sales is a tremendous overhang on the company.”
According to Twitter’s most recent quarterly report, fake or spam accounts accounted for less than 5% of its daily active users in the first three months of the year. In its February quarterly statement, the business stated the same amount.
The social media platform cautioned that their estimate is based on a sample of accounts and that “the real number of fraudulent or spam accounts might be larger than we have calculated.”
As part of his attempt to purchase Twitter, Mr. Musk promised to eliminate bogus Twitter users and spam accounts.
There will be doubts if the phony accounts are the genuine cause for the stalling technique, according to Susannah Streeter, an investment analyst at Hargreaves Lansdown. “The $44 billion price tag is enormous, and it might be a plan to reduce his willingness to pay for the platform,” she added.
The unorthodox effort by the world’s wealthiest man to take over the social media behemoth by tweeting Friday is the latest twist. Mr. Musk started by purchasing a substantial portion of Twitter stock on the open market as a passive investor early this year, which quickly developed into a full-fledged acquisition bid, detailed in a four-paragraph letter and many text conversations to Twitter’s chairman.
The $54.20 per share offer price included a disguised allusion to marijuana. The most recent revelation falls on Friday the 13th, a day associated with bad luck.
Mr. Musk had to sell at least $8.5 billion worth of Tesla shares to finance the acquisition, in addition to Wall Street borrowing. He’s also enlisted the help of 19 investors, ranging from a Saudi prince to Silicon Valley heavyweights, to put up an additional $7 billion.
Meanwhile, federal authorities are looking into Mr. Musk’s late declaration of his large investment in Twitter last month, which enabled him to acquire additional shares without notifying other shareholders, according to The Wall Street Journal, citing sources familiar with the situation.
Mr. Musk filed his paperwork on April 4, more than ten days after his ownership exceeded the threshold for disclosure. He has not publicly said why he failed to file on time. Mr. Musk’s lawyer did not reply to a message seeking comment.
During Mr. Musk’s takeover effort, Twitter has been struggling with the effects of global economic upheaval and the conflict in Ukraine on the digital advertising industry. The corporation said on Thursday that it was halting recruiting in order to save money. The departure of two senior executives was also disclosed.
In a letter obtained by The Wall Street Journal, Twitter Chief Executive Parag Agrawal said, “Effective this week, we are stopping most recruiting and backfills, save for business vital jobs.” Twitter’s action comes amid a larger upheaval in the digital sector, with numerous businesses slashing workers, lowering investment, or halting recruiting in recent weeks.
Anna Hirtenstein can be reached at [email protected]
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