Will Elon Musk Complete His $43 Billion Twitter Acquisition?

Will Elon Musk Complete His $43 Billion Twitter Acquisition?

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One tweet forward, two tweets back. Elon Musk questioned his intention to buy Twitter on Friday, May 13. After publishing a message at dawn indicating that the acquisition was “in suspense” Given the doubts about the number of false accounts present in the social network, the capricious capo claimed to be “always engaged” to complete the transaction.

A sign of the excitement caused by the billionaire’s procrastination, Twitter’s stock price plummeted. The title was trading on Friday at just over 40 dollars, far from the 54.2 dollars per share that Elon Musk proposed in his takeover bid and that valued the company at 43,000 million dollars. Could the operation fail? Franceinfo is investigating the matter.

In his message posted on Friday, the Tesla boss says he wants to make sure “that spam and fake accounts represent well under 5%” of the 229 million active users claimed by Twitter. A subject far from being an accessory for the social network: these “Automated accounts are an endemic problem on the platform, where political actors, fraudsters and even state propaganda services use bot accounts to spread and amplify their messages”writing The world.

Fake accounts (sometimes posing as Elon Musk) have contributed to cryptocurrency scams in the past, while others have stolen users’ login information. Unbearable for the billionaire, who had placed the eradication of these fraudulent accounts at the top of his future priorities when formalizing his takeover bid.

The 5% rate of fake accounts comes from documents transmitted in the spring by Twitter (PDF document) at the Securities and Exchange Commission (SEC), responsible for monitoring financial markets in the United States. But “this official figure is, however, much lower than some estimates”raise it up New York Times (article in English)who remembers that the social network “imposes few restrictions” at the time of registration, which makes it easy to create parallel accounts.

Twitter itself gives grain to its detractors. In the documents transmitted to the SEC, the social network writes indeed having “significant judgment applied” set the number of fake accounts on its platform at 5%, adding that its “the real number (…) could be greater than [son] estimate”. Which is not trivial, since the economic value of the social network is based on 229 million daily users called “monetizable”, that is, exposed to advertising.

Even so, the moment chosen by Elon Musk to share his doubts is surprising. As noted variety (article in English), the 5% fake account estimate has been in Twitter’s SEC filings since the company went public nine years ago. Therefore, the billionaire could have requested verifications before making his purchase offer. To sow a little more doubt, he announced that he wanted to verify the figures advanced by Twitter using a questionable method: verify the number of false accounts in a random sample of one hundred.

Some analysts especially believe that the issue of fake accounts serves as a pretext for the businessman to start a confrontation with the company. “Wall Street will now see the deal as about to fall apart, or an attempt by Musk to negotiate a lower purchase price”Dan Ives, an analyst at the Wedbush Securities investment firm, told AFP.

Showing that the number of actual monetizable users is lower than the number officially reported by Twitter would allow Elon Musk to have a strong argument for paying less than the $43 billion initially promised. What would be of immediate interest to him: to buy the social network, the businessman has in fact developed a financial package based on both traditional loans from banks and investors, and loans guaranteed with Tesla shares, as well as the direct sale of Shares. of Tesla for up to $21 billion, recall The world. However, the automaker’s share fell 29% in a month, complicating his boss’s business.

The strategy of pointing the finger at worse-than-expected performance to negotiate a company’s purchase price down can pay off: in September 2020, the LVMH group had given up its acquisition of Tiffany jewelry, citing the context of the economic crisis caused by Covid-19, then reported the echoes. After threatening legal action, the two groups eventually reconciled by agreeing to a lower purchase price.

Finally, can Elon Musk use the pretext of fake accounts to completely derail the transaction? The interested party did not say anything on the subject. But the maneuver would not be without risks: the agreement between him and Twitter provides for a termination fee of one billion dollars in the event of withdrawal. And the contract includes a “specific compliance clause” which would force the billionaire to fulfill his commitment if his financing plan remained viable, assures the New York Times.

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