Elon Musk Warns He’s Ready To Pay A Billion Dollar Breakup Fee If Twitter Demands Aren’t Met
Elon Musk has made some steep demands to be made if he is to go ahead with purchasing Twitter, and he has no problem taking the one billion dollar hit if they aren't met.
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The battle for Twitter reached a new, ugly level today, with Elon Musk insisting the social media platform prove that bots and other fake accounts make up less than 5% of total users. He insists the number is closer to 20%, and if so, he thinks Twitter is overvalued and wants a lower purchase price than he originally offered. Even as Twitter insists fake accounts are not a problem, the SpaceX founder is at a crossroads: either move ahead with acquiring the platform or walk away and face a potential “break-up fee” of a billion dollars and possible legal action from the company. The latest obstacle became public last Friday after Musk tweeted a link to a Reuters article and demanded Twitter prove its claims that fake accounts are less than 5% of its total user base.
Twitter, for its part, says it actively shuts down thousands of fake accounts and bots each day, and says the 5% claim, which was included in a Securities and Exchange Commission (SEC) filing, is accurate. Elon Musk claims the bot issue is much more prevalent than Twitter admits, and after putting the deal on hold, the company’s stock price has dropped more than 22% over the past week, according to Stash. Over the past year, the value of the company has dropped over 30%., and hiring is largely on hold.
In a response to a tweet by Teslarati, Elon Musk said on Tuesday morning “20% fake/spam accounts, while 4 times what Twitter claims, could be *much* higher,” he said. “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.”
If Elon Musk pulls out of the deal, it could cost him a billion dollars, with nothing to show for it but a lot of press. According to The New York Times, a “breakup fee” of a billion dollars applies if Musk’s financing falls through. Twitter will also have to pay the fee if they go with a higher offer from someone else. Both instances seem unlikely, and many analysts believe this current battle over bots and fake accounts may be a move by Musk to get a lower price overall.
Twitter CEO Parag Agrawal got into a feud, of sorts, with Elon Musk as they exchanged tweets making conflicting claims. Agrawal, in an extended thread of tweets, outlined how the company addresses fake accounts. “We suspend over half a million spam accounts every day, usually before any of you even see them on Twitter,” he claimed. “We also lock millions of accounts each week that we suspect may be spam – if they can’t pass human verification challenges.” Agrawal posted a link to a Twitter blog post outlining the issue, although it doesn’t provide evidence on the scope of the problem.
Earlier today, Elon Musk mocked the 5% claim with a Twitter poll, asking “Twitter claims that >95% of daily active users are real, unique humans. Does anyone have that experience?” The possible responses were limited to two: one was a pair of “laughing” emojis, and the other was a “surprised” emoji with the words “Who me!?” Responses are split evenly, with hundreds of thousands of responses as of press time. Musk’s own tweets seem to support his assertion that the platform is overrun with bots, scammers, and other fake accounts. Every time he tweets, hundreds of bot accounts and scammers respond, offering to sell cryptocurrency and other products.
The truth about fake accounts is a serious one, however, especially to Twitter’s bottom line. Elon Musk has already said that advertisers would shy away from the platform – or insist on lower advertising rates – if it was shown that a good majority of its target audience was fake. That could mean a loss of billions in revenue, potentially, causing Elon Musk to wonder if the company is overvalued. He is offering $54.20 a share for the company, even as the stock price is selling for around $35. A drop in advertiser revenue could see the stock price fall even further. Musk has also promised to make Twitter “open-source,” meaning anyone could see the code that runs the platform and its algorithms. He also promised transparency on issues like fake accounts, both of which could undermine revenue if fake accounts are greater than estimated.
