Elon Musk’s $44 billion Twitter deal looks less attractive

39
2
Elon Musk’s $44 billion Twitter deal looks less attractive

The $44 billion Elon Musk agreed to pay for Twitter and take it private is looking less financially appealing.

Musk said Friday that the deal was on hold pending a review of Twitter's measurement of spam or fake accounts on the platform, suggesting an issue with the company's disclosure of them.

According to a report by Twitter this month, Musk stated that fake accounts comprise less than 5 percent of its 229 million users. As part of his bid to buy the company, the billionaire said that one of his priorities is ridding the platform of spam bots, fake Twitter accounts that generate automated messages.

Musk is relying on a specific performance clause in the contract to avoid that penalty. The clause ensures that a purchaser is buying a product as promised, without any defects. There was no immediate response from Twitter to a request for comment.

The company has done internal surveys that found less than 5 percent of its daily active users are spam accounts. The matter is essential to how Twitter makes money. Ads, which generate revenue for the company, are served to millions of users every day. Advertisers like to spend money on ads, so they look for ads to engage with.

Since May 5, Twitter shares have lost 20 percent of their value. The company was worth $31 billion as of Friday.

Musk said he is still committed to the acquisition but if he proves that Twitter is overrun with automated bot accounts, he could argue in court that Twitter is faulty and should not be paid for, and that the deal should not go through.

According to Eric Talley, a Columbia University law professor, appeared that Musk was looking for a rip cord to pull. It was not clear how Musk planned to verify the share of fake accounts. Musk could not be reached for comment.