AP

EXPLAINER: Is Elon Musk’s deal to buy Twitter falling apart?

Jun 6, 2022, 1:39 AM | Updated: 5:28 pm

FILE - Elon Musk attends The Metropolitan Museum of Art's Costume Institute benefit gala on May 2, ...

FILE - Elon Musk attends The Metropolitan Museum of Art's Costume Institute benefit gala on May 2, 2022, in New York. Musk threatened to walk away from his $44 billion bid to buy Twitter on Monday, June 6, 2022, the latest sign that his plan to overhaul the social media platform may be really starting to fray. (Photo by Evan Agostini/Invision/AP, File)

(Photo by Evan Agostini/Invision/AP, File)

Elon Musk on Monday threatened to walk away from his $44 billion bid to buy Twitter, the latest sign that his plan to overhaul the social media platform may really be starting to fray.

Lawyers for the Tesla and SpaceX CEO made the threat in a letter to Twitter accusing the company of refusing to give him information about “spam bot” accounts. Such bots have become a major public preoccupation for the volatile billionaire despite the fact that he declined an opportunity to examine Twitter’s internal data a few months ago.

DID ELON MUSK BUY TWITTER?

Not yet. In April, Musk signed an agreement with Twitter to buy the company for $44 billion and take it private. But the deal hasn’t closed. And as the weeks have passed, Musk has increasingly signaled discomfort with it, suggesting that he wants to negotiate a cheaper price or even to walk away entirely.

IS MUSK GETTING COLD FEET?

There are several reasons that Musk’s Twitter deal might have lost its luster since he signed it in April. Twitter is standing firm on Musk’s agreed price of $54.20 per share — but since early May, the stock has fallen more than 25% below that figure. The gap between the deal price and the actual share price suggests that many investors don’t think the deal will go through.

Much of Musk’s initial $46 billion plan to finance the deal used stock in Tesla, his electric vehicle company, as collateral for loans he would use to purchase Twitter shares in the deal. He’s since adjusted the plan so that more investors may be involved, including those with Twitter shares. But it’s not clear exactly who those investors might be.

Tesla’s stock price has also fallen dramatically since April 4, the day Musk disclosed that he was Twitter’s largest stakeholder. Its 35% decline has cut deeply into Musk’s wealth, even though he remains the world’s richest person. Tesla’s falling share price also reduces the amount Musk can borrow against his Tesla holdings. Company rules limit Musk to borrowing no more than 25% of the value of his Tesla stake, which means Musk can now raise roughly $13.5 billion against his shares. The figure doesn’t include stock options Musk has exercised or loans he may have repaid.

Musk now owns about 163 million Tesla shares valued at $114.7 billion, according to FactSet.

CAN MUSK CALL THE WHOLE THING OFF?

Experts say Musk can’t unilaterally place the deal on hold, although that hasn’t stopped him from acting as though he can. If he walks away, he could be on the hook for a $1 billion breakup fee. Twitter could also sue to force him to complete the acquisition on the agreed terms.

The Twitter sale agreement does allow Musk to get out of the deal if Twitter causes a “material adverse effect,” defined as a change that negatively affects Twitter’s business or financial conditions. That’s one reason Musk may be focusing on the spam bot problem — though he waived many of his rights to peek under Twitter’s hood when he signed the deal.

WHAT ARE SPAM BOTS AGAIN?

Bots are basically programs that post automated tweets, either for information — like the U.S. government’s “quakebot,” which tweets the details of seismic events — or entertainment. Musk, however, has focused his ire on the “spam bots” used to blast out sales pitches or to inflate the influence of a person or cause.

That problem is highly visible to Musk, one of Twitter’s most active celebrity users, whose name and likeness are often mimicked by fake accounts promoting cryptocurrency scams. Musk says it’s also a problem for advertisers who take out ads on the platform based on how many real people they expect to reach.

So now such bots — and the way Twitter counts them — have become a sticking point in the deal. Twitter has long disclosed it has a “number of false or spam accounts” but estimates that they comprise fewer than 5% of its more than 200 million daily active users.

Musk insists the company has been undercounting them and has demanded that Twitter turn over its internal data for him to examine. It’s not clear whether he can legally demand such information after declining his right to conduct “due diligence” on Twitter’s internal accounting and operations. Some experts say a court will have to decide that.

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

AP

moore redmond washington...

Associated Press

U.S. Supreme Court rules against Redmond couple challenging foreign income tax

The court ruled in the case of Charles and Kathleen Moore, of Redmond, Washington after they previously challenged a $15,000 tax bill.

4 days ago

Image:The New York Giants' Willie Mays poses for a photo during baseball spring training in 1972. M...

Associated Press

Willie Mays, Giants’ electrifying ‘Say Hey Kid,’ dies at 93

Willie Mays, whose singular combination of talent, drive and exuberance made him one of baseball’s greatest players, has died. He was 93.

5 days ago

Image: This photo provided by the Washington Department of Ecology shows a derailed BNSF train on t...

Associated Press

Judge orders BNSF to pay Washington tribe nearly $400M for trespassing with oil trains

BNSF Railway must pay the sum to a Native American tribe in Washington after it ran 100-car trains with crude oil on the tribe's reservation.

7 days ago

Photo: In this photo provided by Tieanna Joseph Cade, an amusement park ride is shown stuck with 30...

Associated Press

Crews rescue 28 people trapped upside down high on Oregon amusement park ride

Emergency crews in Oregon rescued 28 people after they were stuck dangling upside down high on a ride at a century-old amusement park.

7 days ago

juneteenth shooting texas...

Associated Press

2 killed and 6 wounded in shooting during a Juneteenth celebration in a Texas park

A shooting in a Texas park left two people dead and six wounded, including two children, on Saturday, authorities said.

8 days ago

Photo: Israeli soldiers drive a tank near the Israeli-Gaza border, in southern Israel, Wednesday, J...

Jack Jeffery, The Associated Press

8 Israeli soldiers killed in southern Gaza in deadliest attack on Israeli forces in months

An explosion in Gaza killed eight Israeli soldiers, the military said Saturday, making it the deadliest attack on Israeli forces in months.

8 days ago

EXPLAINER: Is Elon Musk’s deal to buy Twitter falling apart?