“My offer was based on Twitter’s SEC filings being accurate,” Musk wrote on Twitter Tuesday. “Yesterday, Twitter’s CEO publicly refused to show proof of <5%. This deal cannot move forward until he does.”
Musk responded to a report that he might be looking for a better deal for the social network as experts believe his proposal could be too high if one-fifth of users are fake or spam accounts.
Twitter confirmed soon after that it had submitted a preliminary proxy statement to the Securities and Exchange Commission (SEC) pertaining to Musk’s offer of $54.20 a share.
“Twitter is committed to completing the transaction on the agreed price and terms as promptly as practicable,” the company said.
“The preliminary proxy statement contains important information including the background of, and reasons for, Twitter’s transaction with Mr. Musk.”
“The transaction is subject to the approval of Twitter stockholders, the receipt of applicable regulatory approvals and the satisfaction of other customary closing conditions, and is expected to close in 2022,” Twitter added in a statement.
In a 13-post Twitter thread Monday, the company’s CEO Parag Agrawal attempted to counter claims that the social media outlet is filled with fake accounts.
“We suspend over half a million spam accounts every day, usually before any of you even see them on Twitter,” Agrawal wrote. “We also lock millions of accounts each week that we suspect may be spam – if they can’t pass human verification challenges (captchas, phone verification, etc).”
Agrawal added that it is not possible to determine the total number of spam accounts on Twitter and to “know which accounts are counted as mDAUs [monetizable Daily Active Users] on any given day.”
This prompted the billionaire to respond with a poop emoji.
“So how do advertisers know what they’re getting for their money? This is fundamental to the financial health of Twitter,” Musk wrote minutes later.
In its first-quarter earnings report last month, Twitter estimated that spam bots represented fewer than 5 percent of its mDAUs in the January-to-March period. The San Francisco-based tech giant also confirmed that it overstated user numbers by as many as 1.9 million over the last three years.
“In March of 2019, we launched a feature that allowed people to link multiple separate accounts together in order to conveniently switch between accounts,” Twitter disclosed. “An error was made at that time, such that actions taken via the primary account resulted in all linked accounts being counted as mDAU.”
When Musk posted on Friday that the Twitter takeover was “temporarily on hold,” he added that his team could conduct “a random sample of 100 followers of @Twitter,” recommending others do the same.
In follow-up posts, Musk offered his methodology, such as selecting any account with a considerable number of followers and ignoring the first 1,000 followers and then picking every 10th user.
“Any sensible random sampling process is fine. If many people independently get similar results for % of fake/spam/duplicate accounts, that will be telling. I picked 100 as the sample size number, because that is what Twitter uses to calculate <5% fake/spam/duplicate,” he said.
Industry professionals, including Facebook co-founder Dustin Moskovitz, have dismissed Musk’s approach because it would not be as random as he would like. Plus, it would be too small of a sample size with room for immense errors.
“Also I feel like ‘doesn’t trust the Twitter team to help pull the sample’ is it’s [sic] own kind of red flag,’” Moskovitz wrote.
Company stock plunged as much as 2.1 percent in pre-market trading. Shares have erased all of their post-deal gains, falling about 25 percent.
There has been some speculation on Wall Street in recent days that Musk may be trying to negotiate a lower price, and these complaints could be a part of his ploy to achieve this aim. In addition, Twitter’s bot disclosure has some experts debating if the company heads had deceived investors for years by providing inflated numbers. If so, analysts argue, Musk may be justified in his apprehension since user data would have a vast impact on revenues and company valuation.
Other market analysts purport that Musk might not be able to afford the Twitter deal after all. Because of Tesla’s falling stock price, banks might be offering him a lower margin loan.
In addition to paying the $1 billion termination fee, walking away from the acquisition could create a sizable headache for Musk since he will likely face many legal battles with the company and its shareholders and lose out on his unrealized profits, said Ali Mogharabi, a senior equity analyst at Morningstar.
But Musk could also face the wrath of Tesla investors, he warned.
“Musk may also get into legal fights with holders of Tesla, who have seen their shares decline 25% since the April 20 filing in which it was revealed that possible financing of the Twitter deal included a margin loan against his Tesla shares,” Mogharabi wrote in a note. “Since then, there have been reports that Musk is trying to raise equity and preferred financing to avoid the margin loan.”
Tesla shares have slumped roughly 30 percent since Musk’s stake in Twitter was revealed.
Meanwhile, Project Veritas released another #TwitterExposed video Monday. The latest investigation featured Siru Murugesan, a senior engineer at Twitter, who claimed that the company “does not believe in free speech” and left-wing staff “hate” Musk for his “capitalist” purchase of Twitter.
“Ideologically, it does not make sense like, because we’re actually censoring the right, and not the left,” he told an undercover reporter, adding that many things have already changed internally with the pending deal.
The senior engineer also highlighted that “no one really cares about like OPEX [operating expenses], like capitalists. They care about numbers or care about how to make the business more efficient.”
According to Murugesan, the culture is different for employees as they focus more on mental health and taking months off at a time. Murugesan revealed that he only worked four hours a week in the first quarter.
Musk has repeatedly stated that he wants Twitter to be a neutral entity that perturbs both the far left and the far right.