It’s starting to look like Tesla Inc (NASDAQ:TSLA) and SpaceX CEO Elon Musk has walked away from his $44 billion offer to buy Twitter Inc (NYSE:TWTR). Sources familiar with the matter told The Washington Post that Musk’s team is no longer discussing funding for the deal.
Why Elon Musk’s Offer To Buy Twitter Is In Jeopardy
The issue is the data Twitter provided regarding fake accounts, spam and bots that crawl its platform. Musk’s team “concluded that Twitter’s figures on spam accounts are not verifiable.” The social network claims that less than 5% of its monthly active user base consists of fake accounts.
However, Musk tweeted that 20% of Twitter accounts could be fake or span accounts, adding that his $44 billion offer was "based on Twitter's SEC filings being accurate." Musk also said that Twitter's CEO has refused to show proof that less than 5% of the platform's accounts are spam or fake accounts.
20% fake/spam accounts, while 4 times what Twitter claims, could be *much* higher.
My offer was based on Twitter’s SEC filings being accurate.
Yesterday, Twitter’s CEO publicly refused to show proof of <5%.
This deal cannot move forward until he does.
— Elon Musk (@elonmusk) May 17, 2022
Musk also publicly declared that the deal is "on hold," pending his ability to verify Twitter's claims regarding spam accounts.
In response to Musk's comments, Twitter said it utilizes a team of human content reviewers, who analyze a sample of tweets. The social network also said it considers several public and private signals to evaluate the activity of the accounts that posted those tweets.
According to Twitter, no outsider, even those with full access to all tweets, can replicate this process. Axios emphasized that Twitter isn't claiming that only 5% of tweets users see will be spam but rather than less than 5% of monthly users are fake.
The news site added that many real people are active users but don't tweet, while fake accounts often post lots of tweets. Additionally, it said the term "bot" means different things to different people. For example, some people use the word to refer to accounts managed by real people who copy and paste comments all the time, while others use it to discount any accounts they disagree with.
However, Twitter uses the term "bots" only for automated accounts that send tweets automatically using software. As a result, the social network sees many automated accounts as legitimate, although it flags both human and automated accounts that post spam, try to manipulate the dialogues, or attempt to shape public opinion.
Musk's Real Issue With His $44 Billion Offer?
Musk has already agreed to pay $44 billion for Twitter unless something significant occurs that negatively impacts the company's business. According to the Post, legal experts don't think the bot issue would qualify, but that doesn't necessarily mean the Tesla chief might not try to use it to walk away from the deal.
It's possible that Musk wants to renegotiate his offer to pay $44 billion for Twitter, given that the tech selloff has drastically reduced his wealth. By arguing that Twitter's user base is smaller than what he thought it was when he made his offer, he could try to reduce his purchase price.
However, even if he convinces a judge to let him out of the deal, Musk still could have to pay a $1 billion breakup fee.