Not so fast! Elon Musk had decided to put the brakes on his deal to buy Twitter, citing concerns about how many accounts on the social media platform are really fake. According to Reuters, Twitter said it estimated that less than 5% of its monetizable daily active user base (229 million users) was bots or spam accounts. But the world’s richest man is now saying that estimates are not enough, and he tweeted that he needs “details supporting [the] calculation” before taking any further course of action.
Musk did follow up that message with another cheeky tweet, however: “Still committed to acquisition.” Yet, stock prices for Twitter took a serious hit once news of the delay hit the airwaves. The Wall Street Journal reported they had fallen by more than 26% in premarket trading on Friday. Investors were already iffy about the company’s future under Musk, and the businessman’s recent hedge is only reducing Wall Street’s confidence in the platform as well as the possibility that the deal might successfully be completed.
Musk can’t simply walk away from the deal sans penalty if he wants, though. As part of the agreement he signed last month, Musk will be required to pay Twitter a billion-dollar “reverse termination fee” should he opt to call it quits. However, that is the minimum amount and can be enacted in situations like fraud on behalf of the seller (Twitter) or outside regulatory issues that void the deal.
But, should the South African want to abandon the purchase altogether yet lack justifiable cause, he will be liable for the “reverse termination fee” as well as likely sued for breach of contract and related damages.
Toni Sacconaghi, Managing Director and Senior Research Analyst for Bernstein, told CNBC’s Squawk Box, “This is probably a negotiation tactic on behalf of Elon… The market has come down a lot. He’s probably using the guise of true active users as a negotiation ploy.”
Watch the video below to see what some talking heads think about Musk’s bot concerns, the future of Twitter in light of the current tech crash, whether traders should buy stock in the social media platform, and more.