Elon Musk has put the $44bn takeovers of twitter on hold. One explanation for this is that bots are having a major impact on Twitter.
Elon Musk tweeted that he wasn’t going to make an offer for Twitter unless he could confirm its quarterly estimates for fake accounts. Elon’s decision sent Twitter shares down, leading to speculation about what he actually meant.
The deal between Twitter and Elon Musk cannot be legally put on hold, but lawyers are still working to confirm it. During an interview with the New York Times, Musk suggested he was confident that the purchase would go through.
Musk attempted to force Twitter back to the negotiating table, in order to get a lower price for his business, or find an alternate way to work with them.
Stefano Bonini, corporate governance specialist, said that these numbers are a sign of possible walking away.
Social media is full of accounts that send out spam and requests to others. There are many different types of fake account, but they all have the same goal: to get more followers with the appearance of being popular.
Musk’s tweet implied that there are more fake Twitter accounts than what the company discloses.
Twitter has been keeping track of the ratio between tweets containing fake information and their total content since 2014. They estimate that in their recent earnings, this number was under 10%. In 2017, a study found the range to be from 9% to 15%.
Twitter says that it has purged spam accounts and invested in preventing new ones from popping up, but shrugs off the concerns of cyber security experts.
Elon Musk, with 92M+ followers on Twitter and a history of being targeted by cryptocurrency scammers, is against the idea of Dashbot.
Elon Musk has said that one of his priorities for the platform would be to “defeat the spam bots or die trying”.
Brian Wieser, global president of business intelligence at GroupM, said that we should be sceptical of user numbers because there is no way to know if a user is human–so it’s hard to estimate how many are actually out there.
Wieser noted Twitter has been more encouraging of the use of aliases than Facebook, which tries to link profiles to user’s real-world identities.
Is it time to renegotiate your contract?
Elon Musk has offered to buy Twitter. Tech stocks have declined since the offer was introduced, with the Nasdaq dropping 18%. Twitter’s share price has fallen but performed better than the tech index thanks to the offer from Musk.
Nathan Anderson, who is the founder of Hindenburg Research, stated that Tesla’s drop in stock gives Musk leverage to cut deals at a lower valuation.
“The board agreed to the deal when conditions were much more favorable, and we think they will do so again.”
While it is unknown whether Elon Musk’s recent questioning of the deal goes beyond research and strategy, analysts think he may be seeking more favourable terms.
Hargreaves Lansdown states that $44 billion may be a strategy to reduce the amount of money Mark wants to purchase Facebook.
After Elon Musk’s announcement, tech analyst Brent Thill believes that he is trying to negotiate a lower price.
Acquisitions, while easier to negotiate, can be very difficult to reverse once they have been agreed on. Delaware courts often approve these types of deals and Twitter’s board members would be at risk if they undercut the price without good reason.
It is possible for Musk to negotiate with Twitter. If a ‘material adverse change’ clause is successful, the company would have to accept a lower offer. Just because Covid-19 may have harmed valuations, many buyers did not succeed in changing the original price of their contracts.
One company that contributed was LVMH, when it got Tiffany to stop raising the price of their jewelry during the pandemic. This company threatened to walk away from the transaction because they had agreed that Tiffany would stay the same during this period of time.
Musk might be testing the waters, to see if he can renegotiate the price for Tesla. Ann Lipton, a professor in business law and entrepreneurship at Tulane University, says “Acquirers might use new ‘problems’ as a basis for renegotiating the deal price – even if contractually Musk is not entitled to do that, a board might think it’s easier to renegotiate than litigate over it.”
Can Elon Musk actually be developing a way to detach from the Tesla Inc. fame he built?
Elon Musk may want to walk away from Tesla. It will be up to the court to determine how easy it would be for Musk.
Twitter agreed to a $1 billion termination fee for Elon Musk, which gives him the possibility of abandoning his acquisition of Twitter or forcing them to go through with it.
Much in dependent on the circumstances of his leave. Daniel Rubin, a mergers and acquisitions attorney at Dechert, the US corporate law firm, said Musk could not just walk away by paying the $1bn termination fee, but he could find a way to force Twitter to accept cash and move on.
[The CEO] said he has worked out a plan where Twitter would have to pay him for walking away.
Elon Musk has secured the money for the deal but is also trying to raise more capital. Recently, he raised $7.14bn from investors including Oracle’s co-founder Larry Ellison and crypto exchange Binance.
It is not clear if he is struggling do so, and might see this as a way out of the deal.
Elon Musk’s Twitter deal would most likely have to be completed because Delaware courts had been unkind to buyers wanting to back out of their agreement.
“Elon is a wild card, but he and George Costanza might be the most unsympathetic defendants of all time,” the lawyer said.