Elon Musk's plan to acquire Twitter is in jeopardy

Elon Musk's plan to acquire Twitter is in jeopardy

Elon Musk's plan to acquire Twitter is in jeopardy

In recent weeks, discussions with investors have cooled, and Musk's camp feels it cannot substantiate Twitter's allegations regarding spam accounts.

Elon Musk's proposal to acquire Twitter is in peril, according to three individuals familiar with the situation, since Musk's team found that Twitter's data on spam accounts are unverifiable.

Musk's team has ceased specific negotiations about finance for the $44 billion project, including with a party seen as a probable sponsor, according to one of the sources. Because of the sensitivity of the ongoing negotiations, the sources spoke on the condition of anonymity.

In recent weeks, Musk's crew has highlighted concerns about the recent data "fire hose" - a plethora of data sold to business clients — they acquired from Twitter. According to the sources, Musk's team's reservations about the spam stats indicate that they do not have enough information to assess Twitter's potential as a business.



Musk's team is set to take potentially dramatic action now that it has determined it cannot validate Twitter's data on spam accounts, according to one of the sources. The insider stated that a change in direction from Musk's team was anticipated, though they did not specify what that shift would entail.

Elon Musk has a growing list of investors lined up to take over Twitter.

Musk may try to back out of the arrangement for a variety of reasons, including spam accounts. Twitter's stock price has plummeted since his acquisition attempt in April, giving the appearance that he is overpaying. Musk also runs two other significant corporations, Tesla and SpaceX, as well as a few start-ups.

However, the conditions of the agreement make it unlikely that Musk will be able to walk away. Musk has pledged to finish it until something catastrophic occurs to Twitter's business, and legal experts are skeptical that the bot issue qualifies. Twitter, which initially opposed Musk's takeover proposal, would be a weaker firm if the transaction fell through than it was when Musk first purchased a share, and analysts anticipate Twitter to battle to get it done. Twitter has stated that it expects to finalize the transaction. Even if Musk persuades a court to let him walk away from the arrangement, he may still be liable for the $1 billion breakup fee.

Twitter spokesperson Brian Poliakoff declined to comment, instead referring to a June statement from the business.



"Twitter has shared and will continue to share information collaboratively with Mr. Musk in order to complete the acquisition in line with the terms of the merger agreement," Twitter stated in a June statement. "We feel that this deal is in all stockholders' best interests." We expect to complete the deal and implement the merger agreement at the agreed-upon price and parameters."

Musk did not reply to a comment request.

In a U-turn, Twitter intends to cooperate with Musk's data demands.

Musk blew up the social media industry earlier this year with an extraordinary offer to take Twitter private, claiming he would be able to develop the company and make it more accessible and, in his opinion, politically impartial. He stated that he would reinstate former President Donald Trump on the service and contended that its content control policies violated free speech. When Musk signed the agreement, he forfeited his right to a more in-depth examination of the company's finances.



However, concerns soon arose as to whether he would truly follow through. A global sell-off in IT markets depleted his own net worth, which he had used to secure financing obligations for the purchase of Twitter.



On May 10, at the Financial Times Future of the Car meeting, Tesla CEO Elon Musk argued that permanently barring then-President Donald Trump from Twitter was "flat-out ridiculous." (Financial Times video)

Musk's excitement for the transaction has been questioned since at least May, when he claimed it was "on pause" until he could determine whether Twitter's long-standing claim that less than 5% of accounts are bots or spam was correct. He accused Twitter of suppressing information, while the corporation said it was working in good faith and fulfilling all of the requirements of the agreement.

"Twitter has not been forthcoming," said a source involved with the negotiations, who requested anonymity due to the sensitive nature of the discussions.



However, emphasis on bots plays into Musk's hands by decreasing Twitter's stock price and maybe allowing him to compel a renegotiation of the transaction at a cheaper price.

According to Carl Tobias, law professor at the University of Richmond, Musk understands the difficulty of backing out at this point, driving him to seek legal justifications to justify a withdrawal.

After highlighting the bot problem, for example, Musk stated that Twitter's data may represent a "material adverse misstatement," a probable allusion to a contractual clause that allows him to drop out of the transaction if a big event occurs that fundamentally affects the business.

Elon Musk claims that workplace harassment will drive employees away from Twitter.

"I believe it's an excuse," Tobias stated. "I don't believe a judge would find that compelling." Tobias highlighted Musk's own failure to conduct due diligence as a reason for his rapid approval of the acquisition. "It appears to me that it undercuts a lot of other points he may make," he added.



The discussion concerning bots on Twitter isn't new, and it's been a huge part of the company's public discourse for years. Musk routinely tweets his displeasure with the site's expansion of spam and bot accounts, declaring in April that he hoped to "fight the spam bots or die trying!" with his Twitter bid. According to some outside experts, the number of bots and spam accounts might be substantially greater than Twitter's estimate. However, because the strategies for generating and disguising the nature of phony accounts vary so frequently, even specialists find it impossible to make firm statements about who is correct.

Twitter has defended its method for identifying undesirable accounts, including during a news conference on Thursday morning.

Twitter stated it takes a sample of "Monetizable Average Daily Users" every three months, the base of users for whom the business feels comfortable charging advertising to target. It examines the sample by hand to establish whether it is genuine or not, including information such as IP addresses that it cannot publicly reveal. It stated that it has always been certain that the total falls below the 5% mark.



Twitter does not block all bots, including those that tweet otter photographs on the hour or the temperature in a certain place. Instead, it searches for evidence of fraudulent or coordinated spam behavior, such as bulk account creation or human coordination to artificially boost a certain tweet, series of tweets, or topic. The briefing's conditions prohibited any of the experts from being mentioned directly or identified by name.

Apple introduces a new security tool to combat government spyware.

Musk's acquisition has thrown Twitter into disarray, causing schisms among staff and anxiety among management. Some staff have begun searching for other employment, fearing Musk would pull back the measures put in place to keep bad information off the site, and have forecast an exodus of employees if the billionaire acquires the firm.

Musk has previously brushed up against Twitter management by attacking the company's policies on its own website and boosting users who have lambasted the company's top lawyer.



Even if the offer fails, Twitter has been dragged through months of turmoil, employee unhappiness, and a poor stock performance. Its recovery will be difficult.

"No matter what: the firm is in play today," a source close to the situation told The Washington Post in May. "I don't believe Elon can simply walk away and everything will return to normal."

This report was contributed to by Rachel Lerman and Joseph Menn.

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