Elon Musk backs out of Twitter takeover
After the threats, place to the act. Representatives of Elon Musk have announced that he “terminates the merger agreement and abandons the contemplated transaction”, in a letter published by the SEC, the US financial markets regulator. For several weeks, the entrepreneur had been putting pressure on the social network, demanding additional information to validate the takeover.
Elon Musk justifies his decision
Elon Musk and his financial partners have asked the social network for details, in particular about spam and fake accounts. He believes that the data transmitted by Twitter does not allow the transaction to be continued.
The 5 information requested by Elon Musk
Here is the information that Elon Musk wanted to obtain to pursue his project.
- The process of evaluating spam and fake accounts in the number of daily active users (mDAU): the social network would not have clearly indicated its process for estimating the number of fake accounts. Elon Musk demanded precise information about the sample used, the results of each step of the process and the tools used by Twitter and its contractors.
- Identifying and suspending fake accounts and spam: beyond the audit and the construction of the sample, Elon Musk wanted to understand the actions taken to identify and suspend these fake accounts. The number of suspensions per day since October 2020, for each reason identified, was requested. “Twitter has indicated that it would not be willing to provide information regarding the methods used to identify and suspend these accounts”.
- The number of users per day for the last 8 quarters: Elon Musk demanded access to all data (samples, calculations, reports, analyses, etc.) related to the number of daily users, “to support Twitter’s claim that less than 5% of its mDAUs are fake accounts or spam”. He believes that Twitter did not provide all the information requested.
- Board documents related to the calculation of mDAUs: Elon Musk asked to be provided with documents for “conduct an independent assessment of Twitter’s board and management’s understanding of its mDAU metric.” It indicates that the data set is incomplete and does not allow this analysis.
- Documents related to Twitter’s financial health: to judge the financial health of the social network, Elon Musk wanted to access several documents, including a full copy of the assessment carried out by Goldman Sachs. He indicates that only a PDF copy of the final presentation was transmitted.
Persistent doubts about the number of fake accounts
Representatives of Elon Musk regret that the social network did not provide this information, and believe that the doubts are now too great.
Mr. Musk has reason to believe that the real number of fake accounts and spam on the Twitter platform is well over 5% […]. Twitter’s true mDAU count is a key part of the company’s business, given that around 90% of its revenue comes from ads.
Financial perspectives and HR movements in question
The company’s recent financial performance and revised outlook are also reviewed. The recent dismissal of executives and a third of the HR department, the resignation of 3 managers since the signing of the agreement and the hiring freeze is also mentioned. Elon Musk believes that these various elements allow him to terminate the merger agreement, without paying any consideration.
Twitter remains determined
The reaction of the social network was not long in coming. Bret Taylor, Chairman of the Board of Directors of Twitter, has indicated his determination to complete the transaction “at the price and on the terms agreed with Mr. Musk”. Legal action is being considered. As a reminder, very high compensation is provided for in the event of unilateral termination of the transaction, up to 1 billion dollars.