September 26, 2023

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Elon Musk’s deal to buy Twitter is in jeopardy

Elon Musk's deal to buy Twitter is in jeopardy

Three people familiar with the matter said Elon Musk’s deal to buy Twitter is in serious jeopardy, with Musk’s camp concluding that Twitter numbers on spam accounts cannot be verified.

One person said that Musk’s team has stopped engaging in certain discussions about financing the $44 billion deal, including with a party purported to be a potential backer. People spoke on condition of anonymity due to the sensitivity of the ongoing discussions.

Conversations with investors have subsided in recent weeks as Musk’s camp has raised doubts about the recent “fire hose” data – a set of data sold to corporate clients – they received from Twitter. The people said the Musk team’s suspicions about the spam numbers indicated that they believed they did not have enough information to assess Twitter’s prospects as a business.

Now that Musk’s team has concluded that it can’t verify Twitter numbers on spam accounts, one person said, strict action is expected. The person said it was likely that a change of direction from Musk’s team would come soon, although they didn’t say exactly what they thought the change would be.

Spam accounts aren’t the only reason Musk might be trying to get away with the deal. Twitter’s stock price has fallen dramatically since its takeover bid in April, giving rise to the impression that it is overpaying. Musk also runs two other major companies, Tesla and SpaceX, along with some startups.

But the terms of the deal mean it won’t be easy for Musk to walk away. Musk agreed to seal the deal unless something major happens to Twitter’s business, and legal experts doubt the bot issue will qualify. Twitter, which initially struggled with Musk’s takeover bid, will be a weaker company if the deal collapses than when Musk first bought a stake, and experts predict Twitter will fight to get it done. Twitter itself said it intends to complete the deal. Even if Musk persuades the judge to let him go, he could still be stuck with the $1 billion deal breakup fee.

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Elon Musk lines up a growing list of investors to dominate Twitter

Twitter accepted a $44 billion takeover offer from Elon Musk on April 25. Why did he want to buy the social media giant? (Video: Hadley Green, Julie Yeon/The Washington Post)

Twitter spokesperson Brian Polyakov declined to comment, but noted a statement the company issued in June.

“Twitter has and will continue to collaboratively share information with Mr. Musk to complete the transaction in accordance with the terms of the merger agreement. We believe this agreement is in the interest of all shareholders. We intend to close the transaction and enforce the merger agreement at the agreed price and terms,” ​​Twitter said in a June statement.

In reverse, Twitter plans to comply with Musk’s data demands

Musk rocked the social media world earlier this year with his unprecedented offer to make the company private, arguing that he would be able to grow Twitter and make it more open and, in his view, politically neutral. He said he would allow former President Donald Trump to return to the service and argued that content moderation practices violated freedom of expression. Musk waived his right to take a deeper look into the company’s finances when he signed the deal.

But soon after, questions arose about whether he would actually follow suit. The global sale of tech stocks slashed his personal net worth, which he had leveraged to secure debt commitments he needed to buy Twitter.

At the Financial Times Future of the Car summit on May 10, the CEO of Tesla said that President Donald Trump’s permanent ban from Twitter was “completely stupid.” (Video: Financial Times)

Musk’s enthusiasm for pursuing the deal has been in question since at least May, when he said the deal was “I’m waiting“So that he could ascertain whether Twitter’s claim that less than 5 percent of the accounts were bots or spam was accurate. Twitter was accused of withholding the information, while the company said it was acting in good faith and providing everything it required in the terms of the deal.”

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“Twitter was not cooperative,” said a person familiar with the discussions, who spoke on condition of anonymity due to the sensitive nature of the conversations.

Focusing on bots plays into Musk’s favour, bringing Twitter’s stock price down and possibly helping him force him to renegotiate the deal at a lower price.

The The debate over robots Twitter is nothing new, and it’s been a huge part of the public conversation about the company for years. Musk himself encounters many spam bots in responses to his tweets. Twitter has long said about 5 percent of its accounts are bots or spam, while outside researchers have sometimes said the number could be much higher. Due to the speed with which tactics for creating and concealing the nature of fake accounts are changing, it is difficult even for experts to make strong statements about who is right.

Twitter is defending its process of measuring spam accounts, including in a Thursday morning news briefing.

Twitter said that every three months, it takes a sample of the “average monetizable daily users,” the user base the company is comfortable charging advertisers to reach. It analyzes that sample manually to determine if it is fake or not. It has always been convenient, she said, for the total to be below the 5 per cent threshold.

Twitter doesn’t ban all bots, which includes accounts that post otter photos per hour or the temperature in a particular location. Instead, it looks for indicators that point to fake or coordinated spam activity, such as mass creation of accounts or coordination between humans to artificially amplify a specific tweet, group of tweets, or topic.

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The terms of the briefing prevented any of the experts from being directly mentioned or cited by name.