Twitter Stock Continues Selloff After Elon Musk Says Deal ‘Cannot Move Forward’ Unless Bot Data Confirmed

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The Elon Musk-Twitter deal moved further into uncertainty on May 17 after the Tesla CEO said he might scrap his planned $44 billion buyout of the social media company unless it can prove that bots make up less than 5% of its users. Twitter shares fell in pre-market trading after sinking more than 8% on Monday.

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In a Tuesday morning tweet, Musk said the deal “cannot move forward” unless Twitter provides proof that spam and fake accounts represent fewer than 5% of overall users. Musk suggested that the actual figure is much higher than that.

“20% fake/spam accounts, while 4 times what Twitter claims, could be *much* higher. My offer was based on Twitter’s SEC filings being accurate. Yesterday, Twitter’s CEO publicly refused to show proof of <5%. This deal cannot move forward until he does.”

Twitter shares fell about 1.7% in premarket trading on May 17. A day earlier, the stock closed down 8.2% to 37.39 — its lowest close in two months and well below Musk’s agreed-upon purchase price of $54.20 a share.

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Musk first raised the prospect of walking away from the deal last week when he questioned Twitter’s claims that bots make up less than 5% of its users. That led to speculation that Musk will either demand a lower price or back out of the deal altogether.

That might be a challenge, however. Twitter said in a May 17 statement that it is “committed to completing the transaction on the agreed price and terms as promptly as practicable.”

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But some watchers think Twitter might not have much choice but to renegotiate if it turns out the company’s bot claims are inaccurate.

“If a revised deal does get done by Musk and Twitter, it will likely be at a much lower price once negotiations take over and the diligence happens around Twitter DAU and algorithms hot button issues,” Wedbush analyst Dan Ives told Bloomberg.

As Bloomberg noted, Twitter regularly states in its quarterly financial reports that the average of false or spam accounts represents “fewer than 5% of our monthly daily active users during the quarter.” Twitter also said that “significant judgment” goes into its estimates, and the actual figure could be higher.

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Musk seems to believe that the actual figure is not only higher, but a whole lot higher. Speaking at a tech conference in Miami on May 16, he said fake users make up at least one-fifth of all Twitter accounts and could make up as much as 90%.

Twitter CEO Parag Agrawal disputed those figures in a May 17 tweet of his own. He said the platform manually checks thousands of accounts per quarter to determine how many should count as spam, but that the process could not be conducted externally because of user privacy concerns.

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No matter how the deal proceeds, Musk won’t be able to walk away scot-free. As previously reported by GOBankingRates, the deal includes a $1 billion “reverse termination fee” Musk will be on the hook for. He also faces the risk of being sued for billions of dollars in damages.

About the Author

Vance Cariaga is a London-based writer, editor and journalist who previously held staff positions at Investor’s Business Daily, The Charlotte Business Journal and The Charlotte Observer. His work also appeared in Charlotte Magazine, Street & Smith’s Sports Business Journal and Business North Carolina magazine. He holds a B.A. in English from Appalachian State University and studied journalism at the University of South Carolina. His reporting earned awards from the North Carolina Press Association, the Green Eyeshade Awards and AlterNet. In addition to journalism, he has worked in banking, accounting and restaurant management. A native of North Carolina who also writes fiction, Vance’s short story, “Saint Christopher,” placed second in the 2019 Writer’s Digest Short Short Story Competition. Two of his short stories appear in With One Eye on the Cows, an anthology published by Ad Hoc Fiction in 2019. His debut novel, Voodoo Hideaway, was published in 2021 by Atmosphere Press.

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