Tesla CEO Elon Musk announced that his deal to buy messaging platform Twitter Inc. was on hold, sparking worries and sending shares of the messaging service lower, but he later clarified that he is still committed to the purchase.
Musk tweeted early Friday morning from his verified Twitter account that the deal is temporarily on hold pending details supporting computation that spam/fake accounts do fact comprise less than 5% of users. “Still committed to acquisition,” he wrote two hours later.
In morning trading, Twitter shares sank 8.7% to $41.15, well below the $54.20 per share, or $44 billion, that Musk agreed to pay for the firm last month. After Musk’s first tweet, the stock was down more than 20% in premarket trade.
The tweets come on the heels of news that many major tech stocks have been losing ground on Wall Street, including Tesla, which has lost 29% in the last month through Thursday. Musk is funding the Twitter transaction with his Tesla holdings.
According to Daniel Ives, a technology analyst at Wedbush Securities, Musk may be leveraging Twitter’s latest announcement to get out of or renegotiate the acquisition. The impact on Tesla stock since the agreement was announced is one factor.
The billionaire skipped completing comprehensive due diligence on Twitter’s business during the sale negotiations in order to reach an agreement sooner, which might make it more difficult for him to back out over anything like a difference in the number of spam accounts. If he tries, the corporation may use a legal safeguard known as “specific performance” to compel him to execute the transaction.
Musk’s initial remark on Friday may be interpreted as a criticism against Twitter, further complicating matters. He can tweet about the deal as long as he does not insult the company or any of its officials, according to the merger agreement.
The CEO had appeared to be making forward on the transaction in talks with Twitter before Friday, but he had begun discussing concerns about the number of spam accounts on the platform, according to people familiar with the situation.
The social media platform cautioned that its estimate is based on a sample of accounts and that the true number of fraudulent or spam accounts could be much higher than anticipated.
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