(CN) — Elon Musk is putting the multibillion-dollar deal to acquire Twitter on hold, he said on Friday morning.
The Tesla CEO who has said he plans to acquire the company to reinstate free speech principles he says are sorely lacking said he remains committed to the deal but is looking to renegotiate.
“Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users,” Musk tweeted from his official account Monday morning. “Still committed to acquisition,” he later added.
Several Wall Street analysts doubted Musk’s official rationale for the pause, saying it probably reflected vastly different market conditions from April, when Musk first announced the deal.
Since then Tesla shares, which Musk used as collateral to potentially bankroll the $44 billion acquisition, have lost a quarter of their value.
Sara Silver, a professor of business journalism and financial communication at Quinnipiac University, told The Associated Press that the decline in Tesla shares means the agreed-upon price for Twitter has become more expensive.
“So it’s become much more expensive for him to buy this company using his Tesla shares,” Silver said.
But others say it has less to do with Tesla’s fall than with the fact that the entire technology sector has suffered a rout in the past three weeks, as inflation, rising interest rates and souring consumer sentiment have combined to afflict the broader market.
This means the $54,20 per share price Musk agreed to pay for Twitter does not reflect its current value and Musk could be looking to get a better deal or get out of it altogether.
“Many will view this as Musk using this Twitter filing/spam accounts as a way to get out of this deal in a vastly changing market,” wrote Dan Ives, an analyst for Wedbush.
Twitter shares fell nearly 8% on the news, trading around $41 — well below the agreed-upon acquisition price. It also comes on a day when the broader market recovered modestly from recent stark declines, with the Nasdaq rising 4% and Tesla clawing back nearly 8%.
The news also comes a day after two high-ranking officials left Twitter and management is circulating memos that the company has failed to meet some its growth forecasts.
If the deal does fall apart, Musk could owe the company approximately $1 billion in termination fees. However, when deals of this magnitude fall apart and they sometimes do, parties are more likely to head to court where they tend to settle for more reasonable fees.
Regardless, Musk’s latest tweet is a signal the high-profile deal will be difficult to consummate amid current volatile market conditions created by inflation and other macroeconomic woes.
The Wall Street Journal reported this past Monday that Musk had visited May 6 and had begun asking questions about the percentage of users that are spam bots or fake accounts. Social media companies are often judged by investors regarding the number of users, as this gives analysts an idea of their business reach.
Twitter does not have as many users as larger platforms like Facebook, Youtube and TikTok, but it is increasingly viewed as more influential since journalists, politicians, athletes and celebrities take to Twitter to communicate directly with the public.
Musk has described Twitter as the de facto modern public forum and said the motivation for his purchase is to restore partisan neutrality and free speech principles.
“Twitter has a strong left-wing bias,” he said this week week.
He also promised to restore former President Donald Trump’s Twitter account, long a grievance with right-wing users who say their viewpoints are shunned and hidden on the platform.
But Musk has also routinely expressed exasperation with bots and spam accounts on the platform.
“There is so much potential with Twitter to be the most trusted & broadly inclusive forum in the world!” he tweeted this month. “That is why we must clear out bots, spam & scams. Is something actually public opinion or just someone operating 100k fake accounts? Right now, you can’t tell.”