By Naveen Athrappully
Elon Musk has suggested he wants to slash his initial $44 billion takeover bid for social media platform Twitter after accounting for the proportion of bots present on the microblogging site.
“I’m worried that Twitter has a disincentive to reduce spam, as it reduces perceived daily users,” Musk said in a series of tweets on May 21. “They still refuse to explain how they calculate that 5% of daily users are fake/spam! Very suspicious.”
When someone on Twitter pointed out that if 25 percent of users on Twitter are bots, then the acquisition deal should cost 25 percent less, Musk responded, “Absolutely.”
On May 13, Musk wrote on Twitter that the deal is “temporarily on hold” pending details supporting the company’s claim that fake or spam accounts only make up 5 percent of total users.
According to a joint Twitter analysis conducted by SparkToro and Followerwonk that looked at 44,058 public Twitter accounts randomly selected from 130 million-plus accounts, 19.42 percent of them were spam or fake accounts—four times that of Twitter’s claim.
In a May 17 tweet, Musk insisted that his offer for a takeover was based on Twitter’s filings with the U.S. Securities and Exchange Commission (SEC) being accurate. However, the company’s CEO has refused to show proof of fake accounts being only 5 percent, due to which “this deal cannot move forward until he does.”
However, Twitter filed a proxy statement with the SEC last week, which could complicate Musk’s push to reduce the deal offer. The Musk-Twitter deal was negotiated on April 23 and 24, and signed on April 25.
According to the deal, Musk has to pay $54.20 per share in cash, which is 41 percent more than the $38.29 per share the company was trading on May 23.
The proxy statement counters Musk’s attempt to reduce the offer value via identifying fake accounts by stating that the billionaire made no attempt to get more information on the issue while signing the deal.
“Prior to entry into the merger agreement, Mr. Musk did not ask to enter into a confidentiality agreement or seek from Twitter any non-public info regarding Twitter,” according to the proxy statement.
If Musk were to pull out of the deal, he would be obligated to pay $1 billion. The fact that Musk did not ask Twitter for more information on fake accounts before signing the deal means that he will have to prove that the company’s public filings were wrong, Ann Lipton, a professor at Tulane University Law School, told Reuters. This would be a high legal bar.
“Twitter has long said ‘this is our estimate of spam but we might be wrong.’ So it’s not clear that they said anything false,” Lipton said.