Elon Musk’s Twitter takeover is far from a done deal as the billionaire entrepreneur has reported the transaction is temporarily on hold.
Much has been said about Musk’s attempt to take Twitter private, but apparently, the deal’s formalization is suffering a setback. The Tesla CEO said the pause was due to details about the number of spam and fake accounts on the platform.
Musk and the Twitter board had agreed to a $43 billion buyout spearheaded by Musk last month. He claims his goal is to improve free speech for the users and also cut down on fake accounts. Perhaps this is why Musk is insistent on seeing how Twitter arrived at the conclusion that less than 5 percent of its 226 million daily active users are either fake or spam accounts.
Mush, however, assures he is still committed to the deal in a follow-up tweet.
Meanwhile, at the news of the pause, Twitter’s share declined by 20 percent, while Tesla’s share went in the opposite direction by 6 percent.
Twitter notes that its calculation of spam accounts is an estimate, and there is the possibility the actual figure is higher. Here is the relevant section of the company’s filing on spam accounts; “We have performed an internal review of a sample of accounts and estimate that the average of false or spam accounts during the first quarter of 2022 represented fewer than 5% of our mDAU during the quarter. The false or spam accounts for a period represent the average of false or spam accounts in the samples during each monthly analysis period during the quarter. In making this determination, we applied significant judgment, so our estimation of false or spam accounts may not accurately represent the actual number of such accounts, and the actual number of false or spam accounts could be higher than we have estimated.”
However, Twitter has admitted to miscalculating its daily active users. In its last earnings report, the company said it had been reporting wrong figures for three years in a row due to a technical error that made it count a user multiple times because they operate more than one account. The numbers were off by almost 2 million each quarter.
Meanwhile, some industry experts suggest Musk is employing a delay tactic to be able to lower the buyout cost. Susannah Streeter, an analyst at Hargreaves Lansdown, said, “Musk’s Twitter takeover was always destined to be a bumpy ride, and now it risks hitting the skids over the number of fake accounts on the platform.
“Twitter’s share price plunged by around 18% in pre-market trading following his tweet indicating the deal was temporarily on hold.
“He is clearly intent on querying the company’s estimate that spam accounts make up less than 5% of active daily users – a key metric given that establishing an accurate number of real tweeters is considered to be key to future revenue streams via advertising or paid for subscriptions on the site.
“There will also be questions raised over whether fake accounts are the real reason behind this delaying tactic, given that promoting free speech rather than focusing on wealth creation appeared to be his primary motivation for the takeover.
“The 44 billion dollar price tag is huge, and it may be a strategy to row back on the amount he is prepared to pay to acquire the platform.”
Apart from fighting spam accounts, Musk has vowed to make Twitter’s content ranking algorithm open-source. He has also said he would reverse the permanent ban placed on former US President Donald Trump, although the immediate past president has said he did not fancy returning to Twitter, which has become boring. He prefers to hold court on his own Truth Social platform, which has had a troubled launch.