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Elon Musk: Twitter deal in doubt over spam accounts

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·Business Reporter, Yahoo Finance UK
·4-min read
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Elon Musk's twitter account is seen on a smartphone in front of the Twitter logo
Elon Musk suggested that he could seek to pay a lower price for Twitter, as he expressed doubts about the presence of fake accounts on the platform. Photo: Reuters/Dado Ruvic/Illustration

Elon Musk’s deal to buy Twitter (TWTR) has hit another speed bump amid concerns over spam accounts on the platform.

The billionaire tweeted that the agreement “cannot go forward” unless the company can show that less than 5% of accounts on the site are fake or spam.

He said his $44bn (£36bn) offer was based on Twitter’s SEC filings being accurate, but that Parag Agrawal, chief executive of the platform, publicly refused to show proof that spam profiles account for less than 5%.

“This deal cannot move forward until he does,” Musk said. He suggested that the figure was closer to 20%, four times what Twitter has claimed, adding that it “could be much higher”.

Read more: Elon Musk's $43bn Twitter bid: What is a poison pill defence?

On Monday, Musk suggested that he could seek to pay a lower price for Twitter, as he expressed doubts about the presence of fake accounts on the platform.

The Tesla (TSLA) and SpaceX boss said reducing his agreed $54.20 per share offer wouldn’t be “out of the question”

“I’m still waiting for some sort of logical explanation for the number of fake or spam accounts on Twitter. And Twitter is refusing to tell us. This seems like a strange thing,” he told the Financial Times.

Agrawal responded with a series of tweets.

“Let’s talk about spam. And let’s do so with the benefit of data, facts, and context… First, let me state the obvious: spam harms the experience for real people on Twitter, and therefore can harm our business.

“As such, we are strongly incentivised to detect and remove as much spam as we possibly can, every single day. Anyone who suggests otherwise is just wrong.”

He added: “We suspend over half a million spam accounts every day, usually before any of you even see them on Twitter. We also lock millions of accounts each week that we suspect may be spam – if they can’t pass human verification challenges (captchas, phone verification, etc).”

Twitter shares fell 8% on Monday in New York, and are down 2.8% in pre-market trading at the time of writing. They are already around 30% lower than the $54.20 a share that Musk has agreed to pay.

Traders are now fearful that the deal may not go through at the original price, and possibly may be forfeited altogether. Musk will face a $1bn break-up fee if he walks away.

But Twitter has said it is committed to completing the takeover at the agreed terms and price. The company issued a statement saying the deal was subject to the approval of Twitter stockholders and is expected to close in 2022.

Read more: Here's how much private equity firms could pay in Twitter bidding war with Elon Musk

“In true Elon Musk style, this deal continues to take a series of unexpected twists and turns, keeping investors on their toes,” Victoria Scholar, head of investment at Interactive Investor said.

“The stock is now trading more than 30% below his $54.30 offer, suggesting that confidence in the deal crossing the line is fading fast. It looks like these spam accounts are creating a convenient excuse for Musk either to walk away or to at least negotiate a better price.

“Remember Twitter was relatively quick to accept Musk’s first offer. Perhaps Musk now thinks he shot too high, particularly given the recent sharp slump in Tesla’s share price since the deal materialised.”

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