Why Elon Musk’s Twitter Deal Could Be In Jeopardy

Twitter

In a recent tweet, Elon Musk said that he will not go ahead with his $44 billion purchase of Twitter (NYSE:TWTR) until he has a better understanding of how many accounts on the platform are fake or spam accounts.

Twitter has estimated in a filing earlier this month that fewer than 5% of its monetizable daily active users (mDAUs) are bots or spam accounts, but Musk believes that the number could be as high as 20%.

“My offer was based on Twitter’s SEC filings being accurate,” Musk tweeted early Tuesday morning. “Yesterday, Twitter’s CEO publicly refused to show proof of <5%. This deal cannot move forward until he does.”

Just after Musk expressed his concerns on the exact number of spam accounts on the platform, Twitter made an announcement, stressing the company’s commitment “to completing the transaction on the agreed price and terms as promptly as practicable.”

A lower TWTR price?

Musk’s tweet raises the question: why would everyone’s favorite billionaire be interested in buying Twitter if he believes that a large portion of the platform’s users are not real people?

One possible explanation is that Musk believes that he can clean up the platform by getting rid of fake and spam accounts. This would make Twitter a more valuable and trustworthy social media platform, which could lead to more people using it.

Alternatively, Musk may simply believe that Twitter is undervalued by the market and that it has potential to grow in the future.

It could also be – and this is the most likely scenario – that the Tesla and SpaceX chief is trying to negotiate a lower price-per-share offer for the platform. This shouldn’t come as a surprise, considering the recent market sell-off.

Overall, the tech-heavy Nasdaq is down 25.45% since the beginning of the year- followed by the S&P and the Dow Jones with 15.91% and 11.32%, respectively

In fact, Jefferies’ equity analyst Brent Thilla thinks that Musk is likely trying to take advantage of the market’s steep sell-off.

In a research note, Thilla said that Musk has realized “that he may be overpaying for the asset” and that he’s using the argument of fake Twitter accounts “as an excuse to pay below $54.20/share.”

It’s unclear what will happen next, but one thing is for sure: Musk is always keeping us on our toes.

Price Action

As of writing, Twitter shares are down less than one percent at $37.16. Ticker is down 13.54% year-to-date and about 30% year-over-year.

The $29 billion market cap company trades in a 52-week range of $31.30 – $73.34.

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