During premarket trading, Twitter shares fell by 18 percent after Tesla CEO Elon Musk announced that a deal with Twitter was on hold until he gets more information about the social media company’s fake accounts. Meanwhile, Tesla shares climbed by almost 7 percent during Friday’s premarket trading.
Last month, Musk made an announcement that he would buy the San Francisco-based company for $44 billion.
Earlier this month, Twitter disclosed in a filing that the company had 229 million users who were served advertising in the first quarter. The company also said that less than 5 percent of its monetizable active daily users for the first quarter were spam accounts or bots. But, Musk wants Twitter to offer confirmation of the number of bots and spam accounts before moving forward with the deal.
Andreessen Horowitz and Oracle’s Larry Ellison are partially funding the deal, and Musk has tweeted that removing “spam bots” from Twitter would be one of his priorities. Two hours later, he put out another tweet saying that he was “still committed to the acquisition,” however. After Musk’s second tweet, Twitter gained back some of its losses. Once trading began on Friday, Twitter shares were only down by about 11 percent.
Before Musk’s announcement about the hold on the deal, Twitter’s market value had dropped below the offering price by $9 billion because of other concerns.
It is expected that Musk, who is worth $220-plus billion, would serve as temporary CEO of Twitter if the deal goes through. Part of the deal’s terms stipulated that Musk would owe a $1 billion breakup fee if he chose to walk away.
Musk also didn’t disclose that he had a stake in Twitter when he put a formal offer to buy the company. The SEC has a 10-day window for disclosures of that nature, which Musk didn’t meet. Now, the Federal Trade Commission is probing the timing of the disclosure. But, Bloomberg has reported that the FTC is reviewing the acquisition separately, and many experts believe that it won’t raise concerns about antitrust.