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Elon Musk Is Trying To Back Out Of Twitter Deal, Expert Says

Damir Mujezinovic - Author

May 17 2022, Published 1:05 p.m. ET

When Twitter accepted a $44 billion buyout offer from Elon Musk, the founder and CEO of Tesla and SpaceX, the company going private seemed like a foregone conclusion.

But in recent days, Musk has been hitting the breaks on the deal, claiming that the allegedly large number of bots on the social network is making him think twice about the purchase.

Is this really true, or is Musk just looking for an exit ramp?

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What Is Musk Complaining About?

For days, Musk has been complaining about bot accounts on Twitter.

Most recently, the billionaire alleged that at least 20 percent of the social network's user base are "fake/spam accounts," despite the company's CEO claiming only five percent are bots.

"My offer was based on Twitter’s SEC filings being accurate. Yesterday, Twitter’s CEO publicly refused to show proof of <5%. This deal cannot move forward until he does," Musk wrote in a Tuesday post.

Musk Is Looking For Excuses, Expert Says

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According to Dan Ives of Wedbush, there is now a less than 50 percent chance Musk will actually purchase Twitter.

Per Business Insider, Ives believes the billionaire is getting cold feet and looking for a way to back out of the deal due to the effect it has had on Tesla.

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Our view is while Musk is committed to the deal the massive pressure on Tesla's stock since the deal, a changing stock market/risk environment the last month, and a number of other financing factors has caused Musk to get 'cold feet' on the Twitter deal with the bot issue not a new issue and likely more of a scapegoat to push for a lower price.

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Are Bots A Real Concern?

Ives also said that bots are no longer a real concern for Twitter since the platform's founder Jack Dorsey solved the issue long ago.

This suggests that Musk is either abandoning the deal or trying to put pressure on Twitter and lower its stock, which could plunge to below $30 if nobody is able to match his initial offer.

"Musk is still committed to the deal per his tweets and appears like he wants to get it done, but the financing stress and equity financing overhang on his golden child Tesla has cast a long shadow on this deal," Ives noted.

'Dog Ate The Homework' Excuse

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In conclusion, Ives said, Musk has come up with a weak excuse to back out of the deal.

"The bot issue at the end of the day was known by the New York City cab driver and feels more to us like the 'dog ate the homework' excuse to bail on the Twitter deal or talk down a lower price," the analyst said.

As Business Insider noted, Tesla's stock has been going up amid speculation that Musk is backing out of the Twitter deal.


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