It was only one month ago that Elon Musk announced that he intended to acquire Twitter and take the company private. It was an audacious move that, from the start, didn’t make much sense financially. However, it did affirm the enormity of Musk’s ego and his desire to make influential social media companies his plaything.
Musk made his intention to buy Twitter public after he had already purchased 73 millions shares of the company, a 9.2% stake. He is currently being investigated by the Securities and Exchange Commission for having failed to file the required disclosures of that stock purchase. But that’s only the tip of his troubles.
On Friday morning Musk tweeted that he is putting the “Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users.””
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
Due to the characteristically cryptic nature of that comment, and the trading chaos it could provoke, Musk later tried to clarify himself, tweeting that he is “Still committed to the acquisition.” However, his pausing the acquisition bid, as well as his stated reasoning for doing it, are both profoundly specious.
First of all, Musk’s claim that he’s hesitating as a result of a report that fewer than 5% of Twitter’s accounts are spam or fake is difficult to take seriously. The scale of potential fake accounts on Twitter is not news. In fact, Twitter has reported it in its quarterly and annual reports to the SEC for at least two years. So either Musk entered into this $44 billion deal without doing the most basic research and due diligence, or he’s lying.
Much of Musk’s financing for Twitter is backed by his stock in Tesla. So if Musk didn’t previously know that there are fake accounts on Twitter, he was neglectfully putting the value of Tesla at risk and would be liable to shareholders for losses. If he did know, then he is likely trying to back out of the deal without having to pay the $1 billion break up fee.
Why would Musk want to back out now, so soon after initiating this deal? It might have something to do with the reaction on Wall Street to his plans. Musk’s offer for Twitter was $54.00 per share. On April 14, when he announced his intentions, Twitter was trading at about $45.00 per share. Since then it has dropped to about $41.00, or about 12%. And it’s down more than 40% from its recent high eight months ago. The fact that the market isn’t willing to pay the offer price of $54.00 is a pretty good indicator that they don’t think the deal will ever go through.
What’s more, the price of Tesla has also declined precipitously. It was trading at about $985.00 when Musk revealed his interest in Twitter in April. It’s down to about $780 now, a drop of about 20%. And it’s down more than 42% from its recent high three months ago. Since Musk is using his Tesla stock to finance the Twitter acquisition, and Tesla’s stock has dropped substantially, the Twitter purchase price becomes much greater for Musk. Which is further evidence that he may be trying to ditch the deal.
So how would all of this affect Donald Trump’s Twitter clone, TRUTH Social? Theoretically, any weakness in its biggest competitor should be a positive for the TRUTH(less) app. However, the shady shell company that is serving as Trump’s vehicle for the enterprise, Digital World Acquisition Corp (DWAC) has been trading down ever since Musk’s Twitter bid became public. On April 14, it was at about $50.00 per share. Now it’s at about $40.00, a 20% drop. And from its recent high of around $100.00 just a couple of months ago, it’s down a whopping 60%.
Apparently Wall Street doesn’t have any more confidence in another Trump boondoggle, than they do in Musk’s deal. And it appears to be irrelevant that Musk promised to restore Trump’s Twitter account when – make that if – he takes over. Trump has already said that he would not return to Twitter, even if his account were reinstated.
That, of course, is probably another Trump lie. There is no way that he would be satisfied with a few thousand followers on TRUTH Social if he could regain his 84 million followers on Twitter. But he can’t say that now or it would appear that he favors the competition. So the grift goes on – for both Trump and Musk.
UPDATE: Trump has weighed in saying that…
“There is no way Elon Musk is going to buy Twitter at such a ridiculous price, especially since realizing it is a company largely based on BOTS or Spam Accounts. Fake anyone? By the time you get rid of them, if that can even be done, what do you have? Not much? If it weren’t for the ridiculous Billion Dollar breakup fee, Elon would have already been long gone. Just my opinion, but Truth Social is MUCH better than Twitter and is absolutely exploding, incredible engagement.”
Trump used to brag about his gazillions of Twitter followers. Now he is asserting that they are “largely based on BOTS or Spam Accounts.” He’s also dramatically exaggerating the reported 5% as “largely”. But then he’s never been very good – or honest – with numbers (see his crowd size estimates and property values). And TRUTH social is already crawling with fake accounts. The site even “verified” a fake Fox News account.
NOTE: Twitter suspended the News Corpse account after 11 years without giving a reason. So if anyone wants to tweet articles from my website, please feel free to do so often and repeatedly.
And check out my books on Amazon:
Thanks so much for your support.