Musk puts $44b Twitter deal 'on hold'

Elon Musk tweeted that his $44-billion deal for Twitter Inc was "temporarily on hold" on Friday while he waits for data on the proportion of its fake accounts, sending shares in the social media platform plunging, reports Reuters.
Tesla CEO Musk, who added that he was still committed to the acquisition, decided to waive due diligence when he agreed to buy Twitter on April 25, in an effort to get the San Francisco-based company to accept his "best and final offer".
Since then, technology stocks have plunged amid investor concerns over inflation and a potential economic slowdown.
The spread between the offer price and the value of Twitter shares had widened in recent days, implying less than a 50 per cent chance of completion, as investors speculated that the downturn would prompt Musk to walk or seek a lower price.
"Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5 per cent of users," Musk told his more than 92 million Twitter followers.
Twitter did not immediately respond to a request for comment. There was no immediate reaction from the investors that Musk tapped last week to raise $7.1 billion in funding.
Musk tweeted a Reuters story from ten days ago that cited the fake account figures. Twitter has said that the figures were an estimate and that the actual number may be higher.
The estimated number of spam accounts on the microblogging site has held steady below 5 per cent since 2013, according to regulatory filings from Twitter, prompting some analysts to question why Musk was raising it now.
"This 5 per cent metric has been out for some time. He clearly would have already seen it... So it may well be more part of the strategy to lower the price," said Susannah Streeter, an analyst at Hargreaves Lansdown.
Twitter shares were down 16 per cent at $38.06 in pre-market trading in New York, way below the $54.20 per share deal price. Shares of Tesla Inc were up about 5 per cent.
Tesla shares have lost about a quarter of their value since Musk disclosed a stake in Twitter of April 4, amid concerns he will get distracted as Tesla's chief executive and that he may have to sell more Tesla shares to fund the deal.
There is plenty of precedent for a potential renegotiation of the price following a market downturn. Several companies repriced agreed acquisitions when the COVID-19 pandemic broke out in 2020 and delivered a global economic shock.
In one instance, French retailer LVMH threatened to walk away from a deal with Tiffany & Co. The US jewelry retailer agreed to lower the price by $425 million to $15.8 billion.
Acquirers seeking a get out sometimes turn to "material adverse effect" clauses in their merger agreement, arguing the target company has been significantly damaged.