Three sources familiar with the deal to buy Elon Musk told Twitter that the deal was in great jeopardy as Musk’s camp concluded that Twitter numbers on spam accounts could not be verified, according to a report by the Washington Post.
One person said Musk’s team had stopped engaging in certain discussions about financing the $ 44 billion deal, and the source spoke on condition of anonymity due to the sensitivity of the ongoing talks.
Talks with investors have cooled in recent weeks as Musk’s camp has raised doubts about the latest data – a bundle of data sold to corporate clients – that they received from Twitter.
The people explained that the Musk team’s suspicions about the spam numbers indicated that they did not have enough information to assess Twitter’s prospects as a company.
After Musk’s team came to the conclusion that they could not verify the Twitter numbers of spam accounts, someone (from Musk’s camp) said that strict action was expected.
He added that it is possible that a change of Musk’s team will take place soon, without revealing the nature of this change.
And spam accounts are not the only reason Musk may be trying to evade the deal; Twitter’s share price has fallen dramatically since its takeover bid last April, leading to the impression that the bid was overvalued.
Musk also manages two other large companies – Tesla and SpaceX along with some new ventures.
But it’s not easy to let go of the deal, because Musk agreed to do so unless there was a major break in Twitter’s business. Legal experts suspect that the problem of false accounts can be classified as a major offense.
Twitter, which initially fought Musk’s takeover bid, will be in a weaker position if the deal collapses than when Musk first bought a stake, and experts expect Twitter to fight to get it done.
According to the Washington Post report, Twitter intends to complete the deal. Even if Musk persuades the judge to let him leave the deal, he can still pay the $ 1 billion cancellation fee of the deal.
Brian Polyakov, a Twitter spokesman, declined to comment to The Washington Post, but referred to a statement issued by the company last June.
Twitter said in a statement in June last year that it “will continue to share information with Musk to complete the transaction in accordance with the terms of the merger agreement. We believe this agreement is in the interests of all shareholders.” We intend to conclude the transaction and implement the merger agreement at the agreed price and conditions. “
While Musk did not respond to a request for comment.
Twitter seeks to seal deal
Musk rocked the social media world earlier this year with his unprecedented offer to make Twitter private, arguing that he could grow Twitter and make it more open and politically neutral, he said.
He said he would allow former president Donald Trump’s account to return to work, arguing that content moderation practices violate freedom of expression.
Musk relinquished his right to investigate the company’s finances more deeply when he signed the agreement.
Before long, questions arose as to whether he would actually do so. The global sale of technology shares led to a significant loss of his personal net worth as he used it to obtain liabilities over the debt he needed to buy Twitter.
Musk’s enthusiasm for pursuing the deal has been at least since May, when he said the deal was “suspended” until he verified the accuracy of Twitter’s statement that less than 5% of the accounts were fake or spam .
Musk accused Twitter of withholding information, while the company said it was acting in good faith and providing everything required by the terms of the agreement.
The newspaper quotes a person familiar with the discussions – who spoke on condition of anonymity due to the sensitive nature of the conversations – as saying that “Twitter does not work together.”
But the focus on counterfeit accounts plays in Musk’s favor, as it lowers Twitter’s share price and possibly helps him force Twitter to renegotiate the deal at a lower price.
Musk is expected to realize how difficult it is to stand back at this stage, which has led him to find legal reasons to justify his retirement, according to Carl Tobias, a law professor at the University of Richmond.
After Musk raised the issue of counterfeit accounts, Musk said Twitter’s numbers could be a “material error in stopping the transaction,” in a likely reference to a contractual clause giving him the ability to undo the transaction. to make in the event of a significant event that changes the way business is fundamental.
“I think that’s an excuse,” Tobias said. “It does not seem to me that the court would find it convincing.”
Musk often tweets his annoyance about spreading spam and bot accounts on the site, and writes in April that he is trying to “defeat or attempt to kill spam bots!”
Researchers say the number of bot and spam accounts can sometimes be much higher than Twitter’s estimates.
But because of the speed with which tactics for creating and concealing the nature of false accounts are changing, it is difficult for even experts to make firm statements about who is right.
Twitter defends its process of measuring spam accounts, and Twitter said it needs a sample of “average verifiable daily users” every 3 months, the user base that the company asks advertisers to access.
The website manually analyzes that sample to determine if it is fake or not, including looking for information such as IP addresses that cannot be shared publicly.
Twitter does not ban all bots, but rather looks for indications of fake or coordinated spam activity, such as mass account creation or coordination to reinforce a specific tweet, group of tweets, or an artificially synthesized topic.
Twitter is in chaos
Musk’s takeover of Twitter plunged Twitter into chaos, leading to riots among employees and unrest between them and CEOs.
Some employees, who fear Musk will retire on Twitter’s precautions to keep malicious content off the site, are looking for new jobs and expect a mass exodus if the billionaire buys the company.
Musk has already confronted Twitter executives by following the company’s policy on its own website and inflating the number of users who have criticized the company’s top lawyer.
Twitter is facing great controversy in the case of the failure of the transaction and problems with employees, and this will cause the shaky performance of the shares for several months.
“No matter what happens now, I do not think Musk will withdraw from the agreement and things can return to normal,” a person familiar with the discussions confirmed to The Washington Post in May.