Speaking in a closed-door session at the All-In Summit in Miami, a conference with tech founders and media personalities, Musk said a deal for Twitter was not “out of the question” at a lower price.
Musk was asked if “at a different price it might be a totally viable deal,” according to an audio recording of the event posted Monday evening by the All-In Podcast.
Musk paused. Then said: “I mean, it’s not out of the question … the more questions I ask, the more my concerns grow.”
Musk’s comments were first reported by Bloomberg.
Twitter CEO Parag Agrawal posted a thread Monday that said the site suspends more than half a million spam accounts daily. He said its estimate of Twitter bots is based on repeated reviews it conducts quarterly of thousands of accounts — which are randomly sampled — that it counts as active on the platform. The reviews are conducted by people, he said.
Musk, however, said at the conference that he thought the real proportion of bots on the site is multiples of what Twitter has claimed and he strongly signaled his belief that it could give him a path out of the deal. The deal carries a $1 billion termination fee. Legal experts have said he would likely be sued by Twitter for exiting.
“It’s a material adverse misstatement if they, in fact, have been vociferously claiming less than five percent of fake or spam accounts but in fact it is four or five times that number,” Musk said. “This is a big deal.”
Musk’s comments appear to reference the clause in the contract that gives him the ability to back out the deal in the event of a significant occurrence that fundamentally changes the business.
Musk did not immediately respond to a request for comment.
The latest developments signal that Musk is continuing to distance himself from his initial $44 billion deal to buy Twitter, which was announced April 25. The Tesla CEO has sparred with Twitter management over the issue of spam bots, fake accounts that often promote cryptocurrencies and peddle scams, although analysts and some advisers have suggested Musk’s focus on the issue is merely a pretext to back out of the deal.
Tesla’s stock has fallen sharply since Musk’s interest in Twitter became public, and Musk’s net worth has taken a significant hit as a result. Much of Musk’s financing for the deal relies on Musk’s ability to leverage Tesla stock as collateral, similar to using property to back a loan. Most recently, the downturn in tech stocks had caused Musk to seek additional investors to lower his equity commitment in the deal, because Musk pledged $21 billion of his net worth — largely tied up in Tesla stock — to buy the site.
Twitter shares fell sharply after Musk’s comments, closing at $37.39 on Monday — well below Musk’s offer of $54.20 per share. The deal had been expected to close later this year before Musk tweeted on Friday that it was on hold “pending details supporting [Twitter’s] calculation that spam/fake accounts do indeed represent less than 5% of users.”
On Monday, Musk responded with a poop emoji to the Twitter thread from Agrawal that sought to explain its methodology for counting bots.
“First, let me state the obvious: spam harms the experience for real people on Twitter, and therefore can harm our business,” Agrawal said. “As such, we are strongly incentivized to detect and remove as much spam as we possibly can, every single day. Anyone who suggests otherwise is just wrong.”
Musk had been outlining his concerns about Twitter bots when he was prompted about potentially seeking a lower price. He had likened the issue to buying a house with a termite problem. The house would be worth less if it were found to consist mostly of termites — when compared to one that had only a minor termite problem, he said.
“You can’t pay the same price for something that is much worse than they claimed,” he said.
On the surface, Musk was outlining his frustrations with his inability to get what he viewed as straight answers out of Twitter.
Kevin Paffrath, a financial analyst and YouTuber who goes by “Meet Kevin” who attended the conference, took notes as Musk spoke. To Paffrath, who was in the audience, it was clear Musk was “laying the groundwork or [had] started renegotiating.”
speaking on a bot problem at twitter @elonmusk says it could be like buying a house when they say it’s 5 percent termites but you find out it’s actually 90 percent termites — says the company has not been forthcoming with him #allinsummit pic.twitter.com/dQxhRnUMJq
— Josiah Daniel Ryan (@JosiahRyan) May 16, 2022
With Musk’s comments at the tech conference Monday analysts signaled doubt about whether the deal would end up going through.
“Our view is that the Street is assigning the chance of Musk walking as more than 50% which speaks to the pressure on Twitter shares … $54.20 is out the window with this circus show,” Dan Ives, analyst with Wedbush Securities, wrote in a note. “[We] view the $44 billion Twitter deal as having less than a 50% [likelihood] to get done as of today … If a revised deal does get done by Musk and Twitter, it will likely will be at a lower price.”
Meanwhile, Twitter issued a new corporate filing late Monday in which the company answered questions related to whether there would be layoffs or whether its content moderation practices would change. But the document gave few answers other than to say that company practices would continue in the same vein as before for the time being. The phrase “business as usual” is repeated nine times in the filing.
Reed Albergotti and Elizabeth Dwoskin contributed to this report.