Twitter (TWTR) shares edged lower Tuesday, potentially extending their recent run of eight consecutive session declines, after Tesla (TSLA) CEO Elon Musk said the social media group must prove that spam and bot accounts comprise only a small portion of its user base for his $44 billion takeover to proceed.
In a back-and-forth with Parag Agrawal yesterday, Musk challenged the Twitter CEO to defend his assertion that the actual number of bots were "well under 5%" over the last four quarters, saying accurate numbers were "fundamental to the financial health of Twitter."
Twitter told the SEC earlier this month that the total of fake accounts, often called bots, was under 5% of its 229 million month active users. The Tesla CEO has previously said there is "some chance" the number of fake and bot accounts "might be over 90% of daily active users", but provided no proof for his assertion.
Musk, who last week said his Twitter pursuit was "on hold" pending an investigation into that number, alleged early Tuesday that "Twitter's CEO publicly refused to show proof of <5% (spam accounts)" adding the deal "cannot move forward until he does."
Twitter reiterated its commitment to the proposed takeover -- at $54.20 per share -- in a Securities and Exchange Commission filing early Tuesday.
Twitter shares were marked 0.65% lower in mid-day Tuesday trading to change hands at $37.15 each, a level that is not only lower than where the stock traded prior to public disclosure of Musk's 9.1% interest on April 4 but also more than 30% south of his $54.20 "best and final" bid price.
Musk also told a conference in Miami that he could still be interested in acquiring Twitter at a lower price, but added that "the more questions I ask, the more my concerns grow" with respect to the debate over the number of fake and bot accounts on the micro-blogging website.
Last week, analysts at Hindenburg Research, a noted short-seller, cautioned that the deal could be 'repriced' if Musk threatens to walk away.
Hindenburg said Musk could pay the $1 billion break-up fee tied to the takeover and still come away with a better deal if he were to re-negotiate, noting his "significant leverage" over the micro-blogging website and the lack of a competing offer.
"Musk holds all the cards here," Hindenburg said. "If Elon Musk's bid for Twitter disappeared tomorrow, Twitter's equity would fall by 50% from current levels. Consequently, we see a significant risk that the deal gets repriced lower."
