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Musk put the deal to buy Twitter on hold following unconfirmed reports of the platform’s fake-account volume.
Elon Musk recently announced that the Twitter Inc (NYSE: TWTR) acquisition deal is on hold, pending details on fake accounts. Musk’s decision to put the Twitter deal on hold came after the platform included crucial information on account usage in an early May filing report. In the report, Twitter stated that fake and spam accounts accounted for less than 5% of the total number of users. As a result, a statement on the Tesla Inc (NASDAQ: TSLA) chief executive’s official Twitter handle read:
“Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users.”
In addition, Musk’s post also included a link to a Reuters report which covered the fake account story.
Twitter, which currently has a monetizable daily active user base of around 226 million, noted in its report that its calculations were an estimate. In addition, the social media giant suggested that the given number may actually be higher. Part of Twitter’s statement read:
“In making this determination, we applied significant judgment, so our estimation of false or spam accounts may not accurately represent the actual number of such accounts, and the actual number of false or spam accounts could be higher than we have estimated.”
Furthermore, in its earnings report posted weeks ago, Twitter admitted a sustained mistake in daily active user count. According to the platform, it had miscounted its daily active users for three years. The social media company ascribed this to a technical error of counting multiple accounts as active despite them being tied to a single user. The incorrect numbers reported resulted in a difference of up to 1.9 million in each quarter. This error also spanned from the first quarter of 2019 through to the fourth quarter of 2021.
Fallout from Twitter Deal on Hold
Musk’s decision to put the deal on hold following Twitter’s filing report may be unsurprising to many. This is because the Tesla boss has prioritized reducing the amount of spam and scam bots, as well as bot armies, as he looks to take over Twitter. He even made that part of his propaganda for improving the social networking platform, alongside promoting free speech. Furthermore, Musk also previously suggested open-sourcing Twitter’s ranking algorithms and charging premium subscribers in meme crypto Dogecoin (DOGE).
Twitter shares fell 20% to $36 in premarket trading after the acquisition deal was suspended. Investors feared that the deal may not even go through after all. Prior to the stock decline, TWTR was already trading well below Musk’s acquisition offer of $54.20 per share.
Since pausing the deal, Musk has not provided much insight into anything else concerning Twitter. In addition, the outspoken businessman did not explain why he chose now to halt the deal. Even though Twitter revealed the 5% figure nearly a fortnight ago, Musk barely referred specifically to that news.