EXPLAINER: Is Elon Musk’s deal to buy Twitter falling apart?

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Elon Musk on Monday threatened to drop his $44 billion bid to buy Twitter, the latest sign that his plan to overhaul the social media platform could really be starting to unravel.

Lawyers for the CEO of Tesla and SpaceX made the threat in a letter to Twitter accusing the company of refusing to give him information about “spam bot” accounts. These bots have become a major public concern for the unstable billionaire despite turning down the chance to review internal Twitter data a few months ago.


Not yet. In April, Musk signed a deal with Twitter to buy the company for $44 billion and take it private. But the case is not concluded. And as the weeks went on, Musk increasingly signaled his discomfort, suggesting he wanted to negotiate a cheaper price or even walk away altogether.


There are several reasons why Musk’s Twitter deal may have lost some of its luster since he signed it in April. Twitter remains firm on Musk’s agreed price of $54.20 per share – but since early May the stock has fallen more than 25% below that figure. The gap between the trade price and the actual stock price suggests that many investors don’t believe the trade will go through.

Much of Musk’s original $46 billion plan to fund the deal used shares of Tesla, his electric vehicle company, as collateral for the loans he would use to buy Twitter stock as part of the deal. OK. He has since adjusted the plan so that more investors can be involved, including those who own Twitter stock. But it’s unclear exactly who those investors might be.

Tesla’s share price has also fallen dramatically since April 4, the day Musk revealed he was Twitter’s largest shareholder. Its 35% drop has cut deep into Musk’s wealth, even though he remains the richest person in the world. Tesla’s falling stock price also reduces the amount Musk can borrow against his Tesla holdings. Company rules limit Musk to borrowing no more than 25% of the value of his stake in Tesla, meaning Musk can now raise around $13.5 billion against his shares. The figure does not include stock options Musk exercised or loans he was able to repay.

Musk now owns about 163 million Tesla shares valued at $114.7 billion, according to FactSet.


Experts say Musk cannot unilaterally suspend the deal, although that hasn’t stopped him from acting like he can. If he leaves, he could be liable for $1 billion in severance pay. Twitter could also take legal action to force it to complete the acquisition under the agreed terms.

Twitter’s sale agreement allows Musk to opt out of the deal if Twitter causes a “material adverse effect,” defined as a change that adversely affects Twitter’s business or financial terms. It’s one of the reasons Musk might be focused on the spambot problem – despite giving up many of his rights to peek under Twitter’s hood when he signed on. the agreement.


Bots are essentially programs that post automated tweets, either for news – like the US government’s “quakebot,” which tweets details of seismic events – or for entertainment. Musk, however, has focused his anger on “spam bots” used to blow up sales pitches or inflate a person’s or cause’s influence.

This problem is very visible to Musk, one of the most active celebrities on Twitter, whose name and likeness are often impersonated by fake accounts promoting cryptocurrency scams. Musk says it’s also a problem for advertisers who run ads on the platform based on how many real people they expect to reach.

So now those bots — and the way Twitter counts them — have become a sticking point in the deal. Twitter has long revealed that it has a “number of fake or spam accounts”, but estimates that they represent less than 5% of its more than 200 million daily active users.

Musk insists the company underestimated them and demanded that Twitter turn over its internal data for him to review. It’s unclear whether he can legally demand such information after denying his right to perform “due diligence” on Twitter’s internal accounting and operations. Some experts say a court will have to decide.

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