Tesla and SpaceX CEO Elon musk signed an agreement with Twitter In April where the billionaire agreed to buy the company for $44 billion and take it private. However, it has been more than a month since the agreement was signed and the deal is yet to close. Furthermore, with each passing week, Musk is becoming increasingly uncertain about the entire deal. The billionaire has openly expressed his displeasure with the deal and suggested that he may want to negotiate a cheaper price or even walk away from it altogether. Recently, Musk threatened to walk away from the Twitter deal, which the Tesla CEO is slowly losing interest in securing. Lawyers working for the billionaire have threatened Twitter in a letter accusing the company of refusing to provide information about “spam bot” accounts. These bots are becoming a big issue for the billionaire, who previously declined the opportunity to check Twitter’s internal data a few months ago.
Why are there two minds about Musk’s deal?
Elon Musk has lost interest in the Twitter deal since signing it in April for a variety of reasons. The social media company has decided to stick to the $54.20 per share price it agreed to in April. However, Twitter’s stock has fallen more than 25% from that figure since early May. Many investors have also speculated that the deal will not take place if the difference between the deal price and the actual share price increases or remains the same.
Initially, Musk planned to finance the $44 billion deal using the electric vehicle company’s stock. He was prepared to use Tesla shares as collateral for the loan, which he would need to buy Twitter shares according to the deal. Since then, he has adjusted his plans to include more investors, including those who hold Twitter shares.
Furthermore, Tesla’s share prices have also plummeted since Musk revealed himself as Twitter’s largest stakeholder in April. Elon Musk He has retained the status of the world’s richest person, but a 35 per cent drop in share prices has deeply affected the billionaire’s wealth. Additionally, the declining share price has also reduced the amount that Musk was willing to borrow against his Tesla holdings. Company rules prohibit Musk from borrowing more than 25% of the value of his Tesla stake. This means that Musk can now raise about $13.5 billion against his shares, and this amount does not include stock options that the company’s CEO may have exercised or debt he may have repaid. According to FactSet, Elon Musk owns about 163 million Tesla shares, which are worth $114.7 billion.
what are spam bots
Spam bots are programs that post automated tweets for information or entertainment. For example, the US government’s “earthquake bot” tweets details of any ongoing seismic events. However, Musk is openly opposing these bots, which can be used to promote sales pitches or increase the influence of a person or a cause.
The “bots” problem has become a major problem for the billionaire as he is one of the most active celebrity users and fake accounts promoting cryptocurrency scams often imitate his name and likeness. Musk has even said this could be a problem for advertisers who take out ads on Twitter, depending on how many real people they’re hoping to reach.
Twitter’s spam bots and the process the company uses to count them have become a major issue in the deal. However, Twitter has already disclosed that the platform has many “false or spam accounts” and the company estimates that it accounts for less than 5% of its 200 million+ daily active users.
Meanwhile, Musk insisted that Twitter is downplaying these bots and called for the company’s internal data to be investigated. The legality of seeking such information is not yet clear after Twitter denied its right to perform “due diligence” on its internal accounting and operations. However, some experts believe that a court may be needed to pass this decision.
What happens if the Twitter deal is canceled
According to experts, Musk may not be able to unilaterally keep this deal on hold for a long time. If the billionaire walks away from the deal he could be charged with a $1 billion breakup fee. In addition, Twitter could also sue Musk and force him to complete the acquisition on agreed terms.
However, the “material adverse effect” caused by Twitter could allow Musk to pull out of the deal, the agreement noted. This “effect” is defined as a change that will negatively affect the business or financial conditions of Twitter. That may have been the reason for Musk to focus on the spam bot problem, though he decided not to peek under the company’s hood before signing the deal.