Elon Musk says Twitter deal is temporarily on hold

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SAN FRANCISCO — Elon Musk tweeted early Friday that his $44 billion bid to buy Twitter was temporarily delayed as he investigated the number of spam accounts on the site, causing the company’s stock to plummet.

“Twitter deal temporarily on hold pending details to support calculation that spam/accounts do indeed represent less than 5% of users,” he tweeted, citing a Reuters article from last week citing a Twitter request .

About two hours later, he added, “Still committed to acquisition.”

It wasn’t immediately clear how Tesla’s CEO would pause the deal or how serious the threat was. Musk is prone to brash statements on Twitter, something that has been scrutinized by the Securities and Exchange Commission. The terms of the deal require a $1 billion break-up fee.

Musk and Twitter did not immediately respond to requests for comment.

At the Financial Times Future of the Car summit on May 10, Tesla’s CEO said permanently banning then-President Donald Trump from Twitter was “downright stupid.” (Video: Financial Times)

Elon Musk Says He Would Roll Back Twitter Ban On Donald Trump

Prior to the tweet, Musk was already looking for additional investors for the purchase, as a market decline is putting pressure on his funding.

Tesla has lost $400 billion in market value since Musk’s stake in Twitter went public in early April, driving a wedge in his acquisition plans as he committed $21 billion of his assets to fund the purchase. Musk planned to buy Twitter with a combination of loans and equity pledges, leveraging much of his stake in the world’s most valuable automaker — from which he derives most of his wealth.

Musk’s net worth, making him the richest man in the world, has fallen by about $50 billion in recent weeks, according to Forbes’ real-time wealth index. And Tesla stock has lost nearly 30 percent of its value in the past month.

Musk disclosed more than $7 billion in funding last week from sources including investment firms, Oracle founder Larry Ellison, cryptocurrency exchange Binance, Qatari sovereign wealth fund and Saudi Prince Alwaleed bin Talal.

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Now Musk is looking for additional investments beyond what he initially planned, due to the economic downturn and the weakening of Tesla’s stock price, according to people familiar with the negotiations who spoke on condition of anonymity, citing the sensitivity of the discussions .

Partly due to the recession, Musk and the bankers involved in the deal are under pressure to strengthen partners. Among them: Yahoo owner Apollo Global Management, which, according to one of the people, is expected to provide more than $1 billion in financing with a group of partners.

And CNBC reported Thursday that start-up investor Jason Calacanis was lining up investors to participate in Musk’s property offer. Potential investors who spoke to The Washington Post said interest in Musk’s bid remains high on the belief that he would make good on his investment, despite his statement that Twitter’s economy is not his concern.

Twitter shares fell about 20 percent in premarket trading after the tweet, but reduced their losses; shortly after the opening bell, they fell 9.5 percent. Tesla shares opened 6.2 percent higher before slipping. Investors in the electric car company, led by Musk, are concerned the billionaire would use his stake to fund the Twitter deal.

It wouldn’t be the first time Musk has tweeted something that moves the markets; sometimes the practice gets him into trouble. Most famously, in 2018, he tweeted that he had secured financing to take Tesla private for $420 a share. The SEC fined him $20 million. He has also tweeted that Tesla is overvalued and tweeted a poll asking the public whether he should sell some of his Tesla stake.

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There were no new SEC filings related to the deal Friday morning, the normal course of events amid major changes, analysts said.

“Doing this in a tweet and not in a file is unscrupulous, and it sends the market into a circus show,” said Wedbush Securities analyst Dan Ives.

The problem of Twitter bots is not new to Musk either. He cited getting rid of social media site spam bots, or automated accounts that frequently promote products or programs, as one of his main focuses for improving Twitter.

“If our twitter bid succeeds, we’ll beat the spambots or die trying!” he tweeted last month. In a broadcast interview this week, he reiterated that the company needs to tackle the bots and build trust with users.

Some experts said it could be a tactic to renegotiate the price of the deal.

“In terms of merger, all I can say is that canceling a deal is a pretty thin straw,” said Ann Lipton, an associate professor of law at Tulane University. “Sometimes things like this are used as a basis for renegotiating a deal price, but again, unless the issue impacts Twitter much more financially than has been reported, there’s no strong basis for that either.”

Lipton said issues, including user accounts, were usually checked out before the parties reached a deal.

Here’s What Musk Said About Buying Twitter

The terms of Musk’s deal to acquire Twitter allow him to tweet about his acquisition “as long as such tweets do not discredit the company or any of its representatives.”

The deal has been on Twitter since its announcement last month. CEO Parag Agrawal announced the departure of two top executives this week, and many employees have expressed concerns about what Musk ownership could mean for the company.

Some employees are especially wary of Musk’s calls to promote “free speech” on the site, a position they fear could lead to a rollback of the security policies the company has put in place to protect users online.

In recent days, Musk has warned that he does not yet own Twitter, although he has made clear plans for the social media service, such as restoring the account of former President Donald Trump, who was banned after January 6, 2021. attack on the United States Capitol.

“Once the Twitter acquisition is complete, the company will be super focused on hardcore software engineering, design, [information security] & server hardware,” huh wrote in a tweet last week, adding: “Also, the work ethic would be extreme, but much less than I demand of myself.”

He said at a summit with the Financial Times on Tuesday that the ban on Trump was “a morally bad decision, to be clear, and in the extreme foolishness”.

The deal could also be affected by external factors, such as oversight by the Federal Trade Commission or the SEC. The Wall Street Journal reported Wednesday that the SEC was investigating Musk over late reporting that he had bought a 5 percent stake in Twitter.

The Washington Post previously reported that he had made $156 million doing so.

Musk has used much of his Tesla stock as collateral for his loans, making the recent economic downturn a particular problem for his bid. Tesla has warned of the risks it faces due to the amount of Tesla stock that Musk has pledged as collateral. Shares of Tesla traded at less than $730 on Thursday, well below the more than $1,100 recorded in early April. A drop of several hundred dollars could lead to requirements that would force Musk to sell some shares, analysts said.

According to financial records, at one point last year, he had pledged more than half of his shares as collateral. Because Twitter’s bid would only increase that exposure, Musk was under pressure to reduce his equity involvement, according to knowledgeable people who spoke on condition of anonymity to discuss sensitive matters.

Elon Musk is worth $270 billion. He would buy Twitter with an IOU.

Tesla was open about the potential risk in its annual filing.

“If Elon Musk were forced to sell shares of our common stock that he has pledged to secure certain personal loan obligations, such sales could cause our stock price to fall,” the document said.

“We are not a party to these loans,” the company wrote. If the stock price fell, Tesla wrote, Musk could be forced by banks to sell Tesla stock to meet his loan obligations.

That could depress the stock further.

“It’s going to be a spiral,” Ives said.

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