Elon Musk tweeted that Twitter deal is temporarily on hold

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SAN FRANCISCO — Elon Musk tweeted early Friday that his $44 billion bid to buy Twitter was temporarily on hold as he examined the number of spam accounts on the site, sending the company’s stocks nearly 20 percent lower in pre-market trading.

“Twitter deal temporarily on hold pending details supporting calculation that spam/accounts do indeed represent less than 5% of users,” he tweeted, linking to a Reuters article from last week citing a Twitter filing.

It was not immediately clear how the Tesla CEO would pause the deal or how serious the threat was. Musk is prone to brash statements on Twitter, something that has drawn scrutiny by the Securities and Exchange Commission. The terms of the deal require a $1 billion breakup fee.

Before the tweet, Musk was already seeking additional investors in his $44 billion bid for Twitter as a market downturn puts pressure on his financing.

Tesla has lost $400 billion in market value since Musk’s interest in Twitter became public in early April, driving a wedge in his acquisition plans at a time when he has committed $21 billion of his wealth to finance it. Musk had planned to buy Twitter with a combination of loans and equity commitments, leveraging much of his stake in the world’s most valuable automaker — from which he derives most of his wealth — into the new venture.

Musk’s net worth, which makes him the world’s richest man, has fallen by around $50 billion in recent weeks, according to Forbes’ real-time wealth index. And Tesla stock has shed nearly 30 percent of its value in just the past month.

Musk disclosed more than $7 billion of financing last week from sources including investment firms, Oracle founder Larry Ellison, cryptocurrency exchange Binance, the Qatar sovereign wealth fund, and Saudi Prince Alwaleed bin Talal.

Musk gets help from tech titans and a Saudi prince in Twitter bid

Now, Musk is seeking out additional investments beyond what he had initially planned, driven by the economic downturn and friction in Tesla’s stock price, according to people familiar with the negotiations who spoke on the condition of anonymity citing the sensitivity of the discussions.

“In the last 60 days, the market’s dramatically changed, and I think the black cloud on Tesla’s stock was underestimated by Musk,” said Dan Ives, an analyst with Wedbush Securities. “I think the biggest miscalculation was that piece.”

In part because of the downturn, Musk and the bankers involved in the deal have been under pressure to solidify partners. Among them: Yahoo owner Apollo Global Management, which is expected to extend more than $1 billion in financing with a group of partners, according to one of the people.

And CNBC reported on Thursday that start-up investor Jason Calacanis was lining up investors to participate in Musk’s ownership bid. Prospective investors who have spoken with The Washington Post said interest in Musk’s bid remains high because of the belief he would make good on his investment, despite Musk’s pledge that the economics of Twitter are not his concern.

Here’s what Musk has said about buying Twitter

Musk did not immediately respond to a request for comment. In recent days, he has cautioned that he is not yet the owner of Twitter, although he has laid clear plans for the social media service — such as restoring the account of former president Donald Trump, who was banned in the wake of the Jan. 6, 2021, attack on the U.S. Capitol.

“If Twitter acquisition completes, company will be super focused on hardcore software engineering, design, [information security] & server hardware,” he wrote in a tweet last week, adding: “Also, work ethic expectations would be extreme, but much less than I demand of myself.”

He said, at a summit with the Financial Times on Tuesday, that the ban on Trump “was a morally bad decision, to be clear, and foolish in the extreme.”

The deal could also be affected by outside factors, such as regulatory scrutiny from the Federal Trade Commission or SEC. The Wall Street Journal reported Wednesday the SEC was probing Musk for late notification that he had purchased a 5 percent stake in Twitter.

The Washington Post previously reported that might have made him $156 million.

Musk has leveraged much of his Tesla stock as collateral for his loans, making the recent economic downturn a particular issue for his bid. Tesla has warned of the risks it faces because of the amount of Tesla stock Musk has put down as collateral. Tesla stocks were trading at under $730 on Thursday, well below the more than $1,100 mark from early April. A drop by several hundred more dollars could trigger requirements that would force Musk to sell some shares, analysts said.

At one point last year, he had put down more than half of his shares as collateral, according to financial filings. Because the Twitter bid would only add to that percentage, Musk has faced pressure to reduce his equity commitment, according to people with knowledge of the matter who spoke on the condition of anonymity to discuss sensitive matters.

Elon Musk is worth $270 billion. He’d buy Twitter with an IOU.

Tesla was open about the potential risk in its annual filing.

“If Elon Musk were forced to sell shares of our common stock that he has pledged to secure certain personal loan obligations, such sales could cause our stock price to decline,” according to the document.

“We are not a party to these loans,” the company wrote. If its stock price declined, Tesla wrote, Musk could be forced by banks to sell off shares to meet his loan obligations.

That could further drive down the stock.

“It becomes a spiral,” Ives said.

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