Twitter Shares Tumble as Their ‘Fire Hose’ Data Can’t Be Verified — Musk Deal in Doubt

Mandatory Credit: Photo by David Fisher/Shutterstock (12921810fm)Elon MuskCostume Institute Benefit celebrating the opening of In America: An Anthology of Fashion, Arrivals, The Metropolitan Museum of Art, New York, USA - 02 May 2022.
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Elon Musk’s $44 billion tumultuous Twitter acquisition seems more shaky by the day, particularly as the issue around spam and bots remains unresolved. The Washington Post reported on July 7 that the deal was “in serious jeopardy.”

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Following the report, shares of Twitter were down 4.1% in pre-market trading on July 8. The shares are down 9% year-to-date, and at $37.33 early on July 8 — much lower than the $54.20 price Musk agreed upon. 

Musk has pumped the brakes on the acquisition, saying that spam and bot accounts comprised at least 20% of users on the social media platform — a figure much higher than the “less than 5%” Twitter had disclosed in filings, as GOBankingRates previously reported.

In June, in compliance with Elon Musk’s most recent demands, Twitter said it would reportedly provide him access to the social media platform’s full set of internal data. This move followed the richest man on the planet saying the lack of said information represented a “material breach” of the requisite conditions concerning his deal to buy Twitter, per GOBankingRates.

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But now, The Washington Post reported that Musk’s team has concluded that the data is not verifiable and is now “expected to take potentially drastic action,” which likely signals “a change in direction from Musk’s team.”

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Wedbush Securities analyst Dan Ives wrote in a note that there is still a 35% chance Musk decides to walk away from the deal and try to pay the $1 billion breakup fee — and that Musk may likely end up “in a nasty court battle with Twitter’s Board for the coming months.”

Ives added that the $54.20 price is “essentially out the window” and that in the scenario that Musk walks away from the deal, “Twitter’s stock on a standalone basis given social media ad headwinds and its peer group is worth $30 or potentially lower depending on the growth monetization trajectory looking ahead.”

“The Twitter deal has clearly caused chaos at Twitter and has resulted in an overhang on Tesla’s stock since April given the Musk financing angle, coupled by a brutal market backdrop for risk,” Ives wrote in the note sent to GOBankingRates.  

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“We see three paths ahead for Twitter and Musk. 1) deal closes without issues at $54.20 (less than 5% chance in our opinion), 2) deal happens but at a renegotiated price in the $42-$45 range (60% chance), or 3) Musk looks to exit stage left and tries to pay $1 billion breakup fee and Twitter Board fights Musk in an elongated court battle (35% chance),” Ives added.

Twitter Maintains Argument About Fake Accounts, Spam

As for Twitter, the company reiterated its defense about the spam and bots issues — saying they make up less than 5% of the company’s daily monetizable users — on July 7, according to The Wall Street Journal.

Late last month, Twitter’s board recommended unanimously that shareholders approve the $44 billion sale of the company to Musk, according to a June 21 Securities and Exchange Commission (SEC) filing.

“The Twitter Board, after considering various factors described in the section of this proxy statement captioned ‘The Merger-Recommendation of the Twitter Board and Reasons for the Merger,’ has unanimously: (1) determined that the merger agreement is advisable and the merger and the other transactions contemplated by the merger agreement are fair to, advisable and in the best interests of Twitter and its stockholders,” according to the filing.

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However, that same day, Musk reiterated that he still has concerns about the Twitter deal before it could go forward. Speaking at the Qatar Economic Forum on June 21, he said there are still “a few unresolved matters” — notably, he said he is still “awaiting resolution” regarding the number of fake and spam users on Twitter, as GOBankingRates detailed.

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About the Author

Yaël Bizouati-Kennedy is a full-time financial journalist and has written for several publications, including Dow Jones, The Financial Times Group, Bloomberg and Business Insider. She also worked as a vice president/senior content writer for major NYC-based financial companies, including New York Life and MSCI. Yaël is now freelancing and most recently, she co-authored  the book “Blockchain for Medical Research: Accelerating Trust in Healthcare,” with Dr. Sean Manion. (CRC Press, April 2020) She holds two master’s degrees, including one in Journalism from New York University and one in Russian Studies from Université Toulouse-Jean Jaurès, France.

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