Updated May 17, 2022 - Economy

Musk: Twitter deal "cannot move forward" unless spam questions answered

Screenshot: @elonmusk (Twitter)

Elon Musk tweeted at 3:32am ET Tuesday that his bid to buy Twitter "cannot move forward" unless CEO Parag Agrawal provides proof for his estimate that less than 5% of users are bots or spam accounts.

Why it matters: Analysts believe Musk is using allegations that Twitter's user base has more bots than the company claims to either back out of the deal or negotiate down a price, especially now that Twitter's stock price has plummeted amid a broader market downturn.

  • Twitter said in a statement that it "is committed to completing the transaction on the agreed price and terms as promptly as practicable."

Details: Replying to an article that suggested he "may be looking for a better Twitter deal," Musk tweeted that "20% fake/spam accounts, while 4 times what Twitter claims, could be *much* higher."

  • "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," he wrote.

Catch up quick: Musk has been publicly back-tracking on his initial $44 billion takeover bid since Friday, when he tweeted that the deal was "temporarily on hold," as he sought more details on the platform's spam accounts.

  • Wall Street had been skeptical that the deal would go through even before that.

The big picture: Rarely do deals of this scale and prominence get worked out publicly in such a bizarre manner. But Musk's reputation for spontaneity and audacity has few onlookers shocked at this point.

  • Some are even wondering whether the entire takeover attempt is anything more than Musk trolling Twitter, using Twitter. 

Case-in-point: On Monday, Agrawal wrote a lengthy Twitter thread defending the company's spam policy and explaining how it approaches the issue.

  • Musk tweeted a "poop" emoji in response.

Twitter on Tuesday morning also filed a preliminary proxy statement with the SEC that showed a timeline of its negotiations with Musk. The filing suggests:

  1. Twitter's bankers advised that it take Musk's deal at $54.20 as it was economically prudent for the company.
  2. Twitter co-founder and former CEO Jack Dorsey told Musk that in his personal view "Twitter would be better able to focus on execution as a private company," per the filing.
  3. Musk told Twitter executives in March that he was considering various options with respect to his ownership, including "starting a competitor to Twitter," in addition to potentially joining the Twitter board or seeking to take Twitter private.

Between the lines: Twitter executives are trying to respond as if business is normal, despite the fact that employees are rattled.

  • On Friday, Twitter chairman Bret Taylor responded to Musk's tweet about the deal being temporarily on hold by tweeting: "We remain committed to our agreement."
  • Last Thursday, Agrawal ousted two of the company’s top executives and paused hiring as part of a push to be more fiscally responsible.
  • He acknowledged the move Friday after Musk said the deal was on pause, tweeting: "While I expect the deal to close, we need to be prepared for all scenarios and always do what's right for Twitter. I'm accountable for leading and operating Twitter, and our job is to build a stronger Twitter every day."

Our thought bubble: The spam narrative appears to be a ploy to either back out of the deal or change its terms.

  • Musk could have requested an audit of the company's accounts and spam policies while doing his due diligence on the deal, like a normal investor.
  • Suggesting the company's filings are inaccurate implies Musk thinks executives are lying to the SEC — a serious allegation.

The bottom line: If it wasn't Musk, all of this would be shocking.

Editor's note: This article has been updated with new details from Twitter's proxy statement.

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