Updated at 2:04 pm EST
Twitter (TWTR) – Get Twitter, Inc. Report shares extended declines Monday after Tesla (TSLA) – Get Tesla Inc Report CEO Elon Musk said the social media group’s legal team told him he had violated a non-disclosure agreement that could further delay his $44 billion takeover bid.
Musk, who last week said his Twitter pursuit was ‘on hold’ pending an investigation into the number of fake and spam accounts on the micro-blogging website, said Saturday that “Twitter legal just called to complain that I violated their (non-disclosure agreement) by revealing the bot check sample size is 100!”.
The billionaire said he’d revealed Twitter’s methodology in calculating the number of potential spam accounts — also known as ‘bots’ — when replying to one of his 93.4 million followers.
The Tesla CEO added that there is “some chance” the number of fake and bot accounts “might be over 90% of daily active users”, although Twitter told the SEC last month that the total was under 5% of its 229 million month active users. He also suggested users were being “manipulated” by Twitter’s algorithm.
Twitter shares were marked 7.4% lower in early afternoon trading Monday trading to change hands at $37.71 each, a level that’s more than 30.4% shy of Musk’s $54.20 offer.
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Although Musk has said he’s “‘still committed to acquisition” of Twitter — a view echoed by board chairman Bret Taylor — the ongoing criticism of the Twitter platform, and the resurfacing of concerns first made public more than two weeks ago, suggest the billionaire investor may be looking to renegotiate for a lower price.
The S&P 500 has fallen more than 12.2% since Musk made his 9.1% stake in Twitter public on April 4, while Tesla shares have fallen around 33.5%.
The $400 billion decline in Tesla’s market value may also have given Musk pause given his reliance on their value to fund the $44 billion deal.
Earlier this month, Musk said he’s received equity commitment letters from various investors, including Sequoia Capital, that totaled $7.14 billion, to aid his Twitter takeover, a move that ostensibly both reduced the cost Musk would provide from his personal fortune while boosting the overall equity portion of the proposed takeover to $27.45 billion.
Securities and Exchange Commission filings published late last month indicated that Musk sold 4.4 million Tesla shares between over the two-day period ending on April 27, just days after inking an agreement to provide around $21 billion in financing for his $54.20 per share offer for Twitter. another SEC filing was made public early Friday, showing Musk had offloaded between $4.5 and $5 billion in shares on April 28.
Earlier this 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.”