Elon Musk's offer to buy Twitter for $44 billion is in serious trouble, says The Washington Post. His team has stopped certain discussions with investors and thinks it won't be able to confirm Twitter's data about the number of spam bots on its platform.
Why it matters
The revelations raise more doubts about whether Musk and Twitter will close the deal.
The Washington Post, citing three anonymous people familiar with the matter, reported on Thursday that the deal is "in serious jeopardy." Musk's team thinks it won't be able to confirm data about the number of fake and spam accounts on Twitter and has stopped certain talks around funding the acquisition, the report said.
The news is the latest in an ongoing saga between Musk and Twitter. Adrian Zamora, a spokesperson for Twitter, pointed to a statement the company shared in June. The statement said Twitter planned to close the deal and enforce its agreement with Musk, which still needs to be approved by shareholders in a special meeting.
"Twitter has and will continue to cooperatively share information with Mr. Musk to consummate the transaction in accordance with the terms of the merger agreement," the statement said. "We believe this agreement is in the best interest of all shareholders."
Musk reached a deal to buy Twitter for $54.20 a share, a 38% premium to Twitter's closing stock price on April 1, when the billionaire revealed he owns more than 9% of Twitter. Musk, who also leads Tesla and SpaceX, says Twitter isn't adhering to principles of free speech and he thinks it would best if the company became private. The First Amendment to the US Constitution protects free speech, but that applies to the government censoring speech and , which can have their own rules about what isn't allowed on their sites.
After Twitter's stock started to fall, Musk said the deal couldn't move forward until Twitter handed over more information about the number of spam and fake accounts on the platform. Musk said that understanding the amount of fake accounts is part of evaluating Twitter's business, which makes most of its money from ad sales. Even though Musk said a lower sales price isn't out of the question, Twitter has said it doesn't intend to lower the price. The company also reportedly provided Musk with a trove of data.
On Thursday, Twitter reportedly said the company removes 1 million spam accounts daily. Twitter has reported that in the first quarter, fewer than 5% of Twitter's 229 million daily users were fake or spam-focused.
Musk's deal to acquire Twitter includes a termination fee, and if he backs out of the agreement, it could trigger a legal battle. Terminating the deal, would cost Musk $1 billion under the agreement, according to an SEC filing on April 25. A lawyer for Musk, Mike Ringler, didn't immediately respond to a request for comment.
Daniel Ives, an analyst with Wedbush Securities, said in a note Thursday that the firm believes there's a 60% chance the deal will happen with a renegotiated price in the range of $42 to $45 per share. There's a 35% chance, Ives wrote, that Musk will still walk away from the deal, pay the breakup fee and likely battle it out in court with Twitter's board.
"The Twitter soap opera is clearly coming to some sort of finale over the coming months as Musk makes the decision to stay (with a lower price) or go," Ives wrote.
Musk's potential takeover isn't the only issue Twitter is grappling with. As social networks brace for an economic downturn, they're also trying to cut costs. The Wall Street Journal reported on Thursday that Twitter laid off 30% of its talent acquisition team. Twitter confirmed the layoffs, noting that it's also pausing most hiring and backfills except for business critical roles.