For the last one and half months, Elon Musk and Twitter have been the talk of the town in tech, business, finance and even the political arena. People’s curiosity about the matter was quelled only when it was announced that Twitter had decided to sell itself for a whopping $ 44 billion to Elon Musk. But, Elon Musk is anything but predictable. The flunky businessman has again come up with a new announcement to shock the world.
Musk may back out from Twitter deal
On May 13, 2022, Elon Musk posted a tweet declaring that the billionaire had unilaterally decided to put the Twitter deal on hold. In the enclosure of his Tweet, Musk had attached a Reuters report declaring the possible reason for Musk’s decision to delay the execution of the biggest deal of his life.
Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of usershttps://t.co/Y2t0QMuuyn
— Elon Musk (@elonmusk) May 13, 2022
According to the Reuters report, originally published on 2nd May, in its regulatory filing, Twitter, still not owned by Musk, revealed the number of false or spam accounts active on Twitter. Apparently, contrary to what everybody believed, only 5 percent of monetizable Twitter users turned out to be bot accounts. The report was based on analysis of 229 Twitter users who were served advertisements in the first quarter of the financial year.
Are Bots the reason?
In his subsequent tweets, Musk explained why he is taking it upon himself to count the number of bots. In response to a verified account’s question about his due diligence before the deal, Musk said that he had relied on the accuracy of previous filings by Twitter.
Musk also explained how his team will count the number of these accounts. Musk and his mavericks will find a random sample of fixed numbers of followers of any big personality and then count the number of bots active in the followers list. He also encouraged others to join the initiative.
To find out, my team will do a random sample of 100 followers of @twitter.
I invite others to repeat the same process and see what they discover …
— Elon Musk (@elonmusk) May 14, 2022
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.
— Elon Musk (@elonmusk) May 14, 2022
Complexities involved in the deal
But, life is rarely fair and not everything is hunky-dowry in Musk’s signals as well. Though Musk has reassured Twitter users that he will go with his acquisition, the legal and financial breakdown of the deal suggests that there may be dirt in the closet.
From the day it was announced that Musk is going to own Twitter, the tech company’s stocks have nosedived. Though, Musk is not the reason for this plunge as the whole technology sector is in rapid decline due to rising inflation and potential economic slowdown, it may be possible that Musk is thinking on purely profit lines.
Musk may have overvalued Twitter
At the time of writing, Twitter shares were trading at $ 40.72, a remarkably less number when Musk decided to buy. When Musk offered to buy, Twitter’s per-share price was hovering over $45. Now that the price has witnessed a radical decline, Musk may have been thinking that he overvalued Twitter. Elon had offered to buy Twitter shares at $ 54.20.
According to an NDTV report, if the current trend of decline in share prices continues, then it is unlikely that Elon Musk will finalise the deal on the basis of his original offer. The report further mentions that even at this $ 14 gap between current price and offer price, there is less than 50 percent chance of deal going ahead. Musk may bring Twitter shareholders to the negotiating table for a lower price.
Musk would not want to lose Tesla
But, the question is why would Elon Musk want a lower price? Musk is the richest man in the world, right? Moreover, he has also commented in the past that his Twitter deal is mainly about protecting free speech. So, why not take it as philanthropy?
As it turns out, lately Musk has decided to look at Twitter from a business angle as well. Musk runs other companies like SpaceX and Tesla. While business sentiments may not affect SpaceX, Tesla is certainly going to be affected if there is any negative news. Musk had pledged that to buy Twitter, he would sell 16 percent of his stake in Tesla. Since Tesla is a company investing in future technology, the decline in its shares was exacerbated by Musk’s decision to pledge Tesla shares. According to a May 10 report by Economic Times, Tesla shares had registered a 31 percent decline after Musk’s decision to buy Twitter was announced. Later, Musk changed his decision and decided to pledge only half of Tesla shares he had originally declared.
Plenty of problems for Musk
But, problems do not end here for Elon. Even if he decides to pull out of the deal, he will have to pay a lofty sum to Twitter. If Musk decides to forfeit the deal, he will have to pay $ 1 billion break-up fee. Moreover, Twitter deal has been signed in such a way that if shareholders want, they may compel Musk to complete the deal.
On the other hand, Twitter CEO Parag Agarwal seems to have also decided to go public. The man who has been under severe criticism for the last two weeks finally decided to throw out two senior employees. According to a Reuters report, one member each from the Consumer and Revenue department had to face the brunt of frustrated Parag Agrawal. Moreover, Parag Agarwal also decided to announce the decision on Twitter, a move which is being seen as part of Parag’s decision to take the matter into his own hands.
Answering the obvious question about his abilities, Parag wrote, “While I expect the deal to close, we need to be prepared for all scenarios and always do what’s right for Twitter. I’m accountable for leading and operating Twitter, and our job is to build a stronger Twitter every day”
While I expect the deal to close, we need to be prepared for all scenarios and always do what’s right for Twitter. I’m accountable for leading and operating Twitter, and our job is to build a stronger Twitter every day.
— Parag Agrawal (@paraga) May 13, 2022
The deal may go ahead or it may not. But, the world is again witnessing the idealism getting defeated in the hands of reality. Musk may have signalled that his Twitter dream is more of a humanitarian gesture, but the brute world of business may not allow him to go ahead. Parag Agarwal got the hint and decided to take matters into his own hands.