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

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

Attorneys for the CEO of Tesla and SpaceX made the threat in a letter to Twitter, accusing the company of refusing to give him information about “spambot” accounts. Such bots have become a major public concern for the volatile billionaire, despite turning down an opportunity to probe Twitter’s internal data a few months ago.


Not yet. In April, Musk signed an agreement with Twitter to buy the company for $44 billion and take it privately. But the deal is not closed. And as the weeks have gone by, Musk has increasingly shown that he’s uncomfortable with it, suggesting he either wants to negotiate a lower price or even walk away altogether.


There are several reasons why Musk’s Twitter deal has lost its luster since he signed it in April. Twitter is sticking to Musk’s agreed price of $54.20 a share — but since early May, the stock has fallen more than 25% below that figure. The difference between the deal price and the actual stock price suggests that many investors think the deal is not going through.

Much of Musk’s original $46 billion plan to fund the deal used stock in his electric vehicle company Tesla as collateral for loans that he would use to buy Twitter shares in the sale. He has tweaked the plan to potentially involve more investors, including those with Twitter stock. But it is not clear who exactly those investors are.

Tesla’s stock price had also fallen dramatically since April 4, when Musk revealed he was Twitter’s biggest stakeholder. The 35% drop has deeply affected Musk’s wealth, even though he remains the richest person in the world. Tesla’s falling stock price also reduces the amount Musk can borrow against his Tesla shares. Corporate rules restrict Musk to borrowing no more than 25% of the value of his Tesla stock, meaning Musk can now raise about $13.5 billion with his supply. The figure does not include stock options Musk has exercised or loans he may have repaid.


According to FactSet, Musk now owns about 163 million Tesla shares worth $114.7 billion.


Experts say Musk can’t unilaterally cancel the deal, though that doesn’t stop him from pretending he can. If he runs away, he could end up with a $1 billion break. Twitter could also sue him to complete the acquisition on the terms agreed to.

The Twitter sale agreement allows Musk to exit the deal if Twitter causes a “material adverse effect,” defined as any change that adversely affects Twitter’s business or financial conditions. That’s one of the reasons Musk may be focusing on the spambot problem, even though he waived many of his rights to peek under the Twitter hood when he signed the deal.


Bots are programs that post automated tweets, either for information — like the US government’s quake bot, which tweets details of earthquakes — or for entertainment. However, Musk has directed his anger at the “spam bots” used to spread sales pitches or amplify misinformation and propaganda.

That problem is highly visible to Musk, one of Twitter’s most active celebrities, whose name and likeness are often impersonated by fake accounts promoting cryptocurrency scams. Musk says it’s also a problem for advertisers who place 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 bottleneck in the deal. Twitter has long disclosed a “number of fake or spam accounts” and estimates that these account for less than 5% of its more than 200 million daily active users. Musk insists the company undercounted them and has demanded that Twitter pass on his internal data so he can investigate. It’s not clear whether he can legally require such information after refusing his right to conduct “due diligence” on Twitter’s internal accounting and operations. Some experts say a court will have to decide that.

Albert L. Davis

My name is Albert, and I am a full time blogger by passion. I write about things that I am passionate about, and I have been lucky enough to find a career that fits me so well. I love being able to come home from work and spend my day doing what I want to do. I enjoy sharing tips and tricks to help others live a more balanced life, and I am grateful every day for the chance to share my knowledge with people all over the world.

Related Articles

Back to top button