It certainly is odd timing. One day after Elon Musk was announced as the subject of a federal investigation by the Securities and Exchange Commission, the billionaire tech CEO now says that his Twitter takeover is on hold.
Musk chalked up the temporary hold to a spam/bot issue that has been plaguing the Big Tech platform for at least a decade. On Friday, Musk announced that development:
Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of usershttps://t.co/Y2t0QMuuyn
— Elon Musk (@elonmusk) May 13, 2022
“Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users,” Musk said.
UPDATE: Musk added he is “still committed to acquisition.”
Still committed to acquisition
— Elon Musk (@elonmusk) May 13, 2022
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Variety reported on Twitter’s bot issue — and underscored that Musk may be wielding a bit of strategy:
Early Friday, the mega-billionaire tweeted that his deal for the social network was “temporarily on hold,” citing the need to conduct due diligence on Twitter’s claim that fake and spam accounts represent less than 5% of its active user base. He linked to a Reuters story based on Twitter’s latest quarterly 10-Q with the information.
However, that disclosure has been in Twitter’s SEC filings for years — literally since the company first went public in 2013. It’s right there in the Twitter S-1 registration statement: “We currently estimate that false or spam accounts represent less than 5% of our [monthly active users].” Since then, Twitter has regularly reported that same stat in its filings, updated for when it shifted from reporting monthly to daily active users starting in Q4 2018.
Twitter stock is already down nearly 10% on the news, representing approximately $9 billion in market capitalization. It follows Musk’s Tesla going down nearly a quarter in the last six months; but it jumped 5% on the day after the Twitter “pause” news.
Bots were only one of many issues that the CEO has highlighted at a Financial Times forum, where he also expressed his opposition to “permabans” such as the one carried out against former President Donald Trump.
“This is really the two-paid elephant in the room,” a Financial Times event host asked Musk. “Are you planning to let Donald Trump back on?”
“Well, I think there’s a general question of should… Twitter have permanent bans?” Musk replied. “And you know, I’ve talked with Jack Dorsey about this and he and I are of the same mind, which is that permanent bans should be extremely rare and really reserved for people where they’re trying to… for accounts that are bots or spam scam accounts, where there’s just no legitimacy to the account at all.”
“I do think that it was not correct to ban Donald Trump,” Musk added. “I think that was, that was a mistake, because it it alienated a large part of the country, and did not ultimately result in Donald Trump not having a voice. He is now going to be on Truth Social, as will a large part of the… right in the United States.”
“And so I think this could end up being frankly worse than having a single forum where everyone can debate,” Musk went on. “So I guess the answer is that I would reverse the permaban. Obviously I’m not… I don’t own Twitter yet, so this is not like a thing that will definitely happen because what if I don’t own Twitter?”
“But my opinion and Jack Dorsey, I want to be clear, shares this opinion, is that we should not have permabans,” he added. “Now, that doesn’t mean that somebody gets to say whatever they want to say. If they say something that is illegal, or otherwise, you know, just destructive to the world then, then that there should be perhaps a timeout, a temporary suspension or that particular tweet should be made invisible or have very limited traction.”
“But I think permabans just fundamentally undermine trust in Twitter,” he added.
Twitter’s “safety” team obviously disagrees, which is one reason why a ‘bloodbath‘ at the company has been expected once Musk presumably takes over as temporary CEO.
“Elon Musk is planning to fire 1,000 staffers at Twitter as soon as his purchase of the social media platform is complete,” the Daily Mail reported. “It’s believed he will fire many of the firm’s woke staff following the transfer of ownership which will take around six months, after which Musk is likely to wield the ax. But then within the next three years, Musk anticipates making thousands of new hires, swelling the ranks to around 11,000 employees, up from 7,500 currently.”
“Numbers at the company would fluctuate rising to 9,225 employees this year before falling to 8,332 in 2023,” the report continued. “Then adding a further 2,700 workers by 2025.”
“Most of the jobs being shelved would occur during the takeover period, according to a pitch deck Musk presented this week to investors and seen by the New York Times,” the report added.
While Musk expects advertising revenue to decrease to 45% of total revenue by 2028, he plans for subscriptions to pull in the remainder of revenue — potentially adding another $10 billion.
Musk is now “expected to serve as a temporary CEO of Twitter for a few months after he completes his $44 billion takeover of the social media company,” CNBC’s David Faber reported earlier this week.
The Tesla founder and CEO has been “on the warpath” against the Woke establishment, reportedly even bringing the Big Tech platform’s Trump-banning chief counsel Vijaya Gadde to tears. She’s expected to be axed.
At the Meta Gala in early May, Musk talked to the AP about his plans for Twitter.
— The Associated Press (@AP) May 3, 2022
“Well, I mean, the goal that I have, should everything come to fruition with Twitter, is to have a service that is broadly — is as broadly inclusive as possible where ideally most of America is on it and talking!” Musk told the AP.
“I think just generally, the — I’m looking for something that’s like I said as broadly inclusive as possible, that’s as trusted as possible as a system, and I hope we are successful in that regard,” he continued.
“I’ve also vowed this publicly that we have to get rid of the bots, trolls, scams, and everything,” he added. “That’s obviously diminishing the user experience and we don’t want people to get tricked out of their money and that kind of thing.”
Meanwhile, an SEC investigation into Musk’s Twitter buyout was announced on Thursday. Musk was allegedly late in disclosing that he had taken over 5 percent of the company, and the SEC requires stakeholders that pass such a threshold to notify other stakeholders.
“The SEC rule is supposed to allow existing shareholders to receive a warning that the company may be facing a buyout attempt,” Fox Business notes.
Ultimately, Musk may be forced to reach a settlement with the SEC, but alone would likely not constitute enough cause to block the sale.