Tesla CEO spoke at Miami summit while his relationship with Twitter management reached a new low
Elon Musk has hinted that he could seek to pay a discounted price for Twitter, as the anticipated owner of the social media company expressed additional concerns about the existence of fake accounts on the platform.
Tesla’s CEO said lowering his agreed $54.20 per share offer would not be “out of the question”, days after placing the $44bn ($36bn) deal “on hold” after he inquired about the number of spam accounts on Twitter.
Musk, while speaking at the All-In Summit in Miami, said that the deal going through would be determined by Twitter’s response to his concerns over fake accounts. He was quoted in reports published by the Financial Times:
“It really depends on a lot of factors here. I’m still waiting for some sort of logical explanation for the number of sort of fake or spam accounts on Twitter. And Twitter is refusing to tell us. This seems like a strange thing.”
Twitter Insists On Minimal Spam And Fake Accounts
Twitter has stated repeatedly in its quarterly results over the years that less than 5% of its users are spam or fake accounts. Using a term that can be referred to when companies want to scrap or reprice deals, Musk said it might be a “material adverse misstatement” if it turns out that Twitter’s fake or bot accounts total to greatly over 5%.
“Like if you said, OK, I’m going to agree to buy your house. You say the house has less than 5% termites. That’s an acceptable number. But if it turns out the right percent is 90% termites, that’s not OK.”
Lawyers have doubted whether Musk can walk away from the deal – or seek to reprice the deal – by concentrating on bots issues. The deal agreement involves a $1bn break fee if Musk walks away, but Twitter can also impose a clause that could push Musk to finalize the deal at $54.20 per share.
Shares in Twitter closed Monday down only over 8% at $37.39, below where the stock was just before Musk announced that he was the largest shareholder in Twitter. In the meantime, Musk’s relationship with Twitter’s management hit a new low on May 16 after he tweeted a poo emoji at the company’s chief executive.
This was in response to a comprehensive Twitter thread posted by his Twitter counterpart, Parag Agrawal, shedding light on the company’s policy on spam accounts. Musk has expressed doubt about Twitter’s claims that less than 5% of its users are spam or fake accounts and has said he will conduct his own investigation.
Agrawal explained that dealing with automated spam accounts was a “dynamic” process that required confronting “sophisticated and hard to catch” actors. He added that several accounts that seem to be spam are actually managed by real people.
“The hard challenge is that many accounts which look fake superficially are actually real people. And some of the spam accounts which are actually the most dangerous – and cause the most harm to our users – can look totally legitimate on the surface.”
He added that estimating the number of Twitter’s fake accounts could not be done externally as the process required access to sensitive data such as phone numbers and IP addresses.
Musk And Agrawal Engage In A War Of Words
Agrawal’s thread ended with a link to a company blog post on spam accounts while disclosing that Twitter had talked about how it estimated its spam number with Musk a week earlier and that the company expected “to continue the conversation with him”.
Musk reacted with a poo emoji, followed minutes later by questioning how advertisers on Twitter knew what they were getting for their money. He tweeted:
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“So how do advertisers know what they’re getting for their money? This is fundamental to the financial health of Twitter.”
Musk tweeted on Saturday that Twitter’s legal team had blamed him for violating a non-disclosure agreement by disclosing that the sample size for the platform’s checks on automated users was 100. In April, Musk participated in tweets criticizing Twitter employees, even with the entrepreneur accepting not to “disparage” the company or its representatives while he finalizes the deal to acquire the social media platform.
Musk’s behavior, emphasized by his remarks in Miami, has spurred speculation that he is planning to reprice the deal or walk away from it, which would carry the cost of a $1bn break fee for the world’s richest man. Several experts question whether the multibillionaire is committed to buying the company.
Drew Pascarella, a senior lecturer on finance at Cornell University, explained:
“I honestly don’t know if Elon wants to buy Twitter. At first, I thought he wasn’t serious. Then he paired with banks and financiers and came up with a legitimate acquisition plan. Now he’s called a timeout about an issue that is both well-known and should have no bearing on his future plan for the company. If it’s attention he’s seeking, he has it. But does he want to own Twitter? Did he ever?”