Billionaire Elon Musk sent Twitter shares plummeting as much as 18% during the May 13 trading session, tweeting that he has put the $44 billion acquisition deal "on hold." The social media platform pared its losses when Musk sent out a second tweet confirming that he is "still committed" to the purchase. Is Musk backing out of the agreement? Is he masking some bad publicity at the tech giant? Or is it really his concern over the prevalence of fake accounts and spam bots on the platform?
Much Ado About Nothing?
Earlier this month, Twitter estimated in a filing that false or spam accounts represented fewer than 5% of its total 229 million monetizable Daily Active Users (mDAUs) during the first quarter of 2022. The microblogging platform noted that the figure "could be higher than we have estimated." The company added that it might endure several risks until the agreement with the billionaire is officially finalized and closed.
Since he acquired a stake in the company, and then unveiled his proposal to buy the San Francisco-based tech firm for $54.20 a share, Musk has been vocal about his disdain for fake accounts and his desire to remove bot armies from the digital portal. Bots are nothing more than automated accounts that mirror the activity of real users. They tweet, like, retweet, and follow. It might seem benign, but they typically engage in deceptive and harming activity, be it scamming individuals or driving traffic to a product or politician. Musk has vowed to "defeat spam bots or die trying.”
What makes Musk’s announcement suspect is the timing. The filing had been published two weeks ago, meaning the self-anointed TechnoKing or Dogefather had plenty of time to sit on this information before telling his millions of followers that the takeover might be on hold. This has some market analysts determining if this is a legitimate suspension or if there is something underneath it all.
Walk Away
Elon Musk (Photo by Dimitrios Kambouris/Getty Images for The Met Museum/Vogue)
Perhaps Musk, who is expected to serve as Twitter's temporary CEO, wants to abandon his pursuit of the struggling website. The ubiquitous nature of bots might not be a reasonable objection to buying Twitter. If so, he would be required to pay a $1 billion breakup fee should he choose to walk away from the deal. However, it is unclear if shareholders would accept this excuse, potentially leading to a lawsuit as investors would seek damages.
Other market analysts have speculated that this could be Musk planting the seeds of trying to negotiate a better price. He may think he overpaid for Twitter, so Musk could be gathering a list of reasons why the company is worth less than the $44 billion he presented to the Board of Directors.
Tesla Motors may play a role, too. The electric vehicle maker joined the broader May 13 rally, rising more than 6%. However, the stock has been decimated since Musk's announcement, with shares tumbling about 25%. If the Twitter saga is weighing on Tesla, which Musk borrowed against to help fund his takeover, he might have second thoughts.
Let the Terminations Begin?
(Photo by Kena Betancur/VIEW press)
Twitter recently confirmed that two senior executives had been terminated from their positions ahead of Musk's possible takeover. The two names are Kayvon Beykpour and Bruce Falck. Beykour, who was on paternity leave when he received the pink slip, is the general manager of research, design, and engineers. Falck is the head of Twitter's products.
The global messaging platform also announced that it had paused all hiring, except for critical business roles. Since Musk's bid for the company, Twitter has seen a significant increase in employment opportunities, despite internal personnel throwing hissy fits, according to Glassdoor data.
Hold the Line
Is this a buying opportunity for investors? With the company trading at around $41 a share, Twitter stock has a roughly 32% upside should the deal go through in the coming months. Of course, if the acquisition fails, shares could tank, leaving many traders holding the bag. Conventional market analysis would convey that scooping up a position in Twitter securities is a prudent investment decision. However, since this involves Elon Musk, the king of trolls and someone who perturbs the establishment, it is unclear what happens next. Will Twitter say hello to CEO Elon Musk, or will the entrepreneur sign a $1 billion check to CEO Parag Agrawal?
