Skip to main content

Twitter Bid: Musk Wants Help From an Agency He Hates

Billionaire Elon Musk wants the U.S. Securities and Exchange Commission to examine Twitter's financials.
  • Author:
  • Publish date:

The richest man in the world who has a history of fighting with the Securities and Exchange Commission that regulates the stock market is now asking the agency to investigate Twitter (TWTR) - Get Twitter, Inc. Report over fake accounts on the platform.

Musk has challenged Twitter's board of directors and management since he made an acquisition offer of $44 billion to take over the social media company on April 14. He said on May 17 that he wants Twitter to verify its data on the number of spam accounts or that the takeover deal is no longer on the table.

"My offer was based on Twitter’s SEC filings being accurate. Yesterday, Twitter’s CEO publicly refused to show proof of <5%. This deal cannot move forward until he does," Musk said.

'Hello @SECGov Anyone Home?'

Musk has launched a poll on Twitter whose question is: “Twitter claims that >95% of daily active users are real, unique humans. Does anyone have that experience?"

When a user commented that the SEC should investigate, Musk didn't hesitate.

 “Hello @SECGov, anyone home?" the billionaire said.

This saga could be an attempt by the CEO of Tesla ( (TSLA) - Get Tesla Inc. Report) to renegotiate the terms of the deal and seek a lower price or back out of the deal completely.

Musk's latest ploy is to focus on how many Twitter accounts are spam or bot ones.

Twitter shares moved higher on Tuesday, following a run of eight consecutive session declines.

Musk challenged Twitter CEO Parag Agrawal on Monday to defend his claim that the actual number of bots were "well under 5%" over the last four quarters and also said accurate numbers were "fundamental to the financial health of Twitter."

A Cheaper Price?

Twitter said it remains committed to the proposed takeover for $54.20 per share, accorrding to a SEC filing early Tuesday. 

Musk has been working to lower the deal price and already stated that a cheaper acquisition price was not “out of the question."

Scroll to Continue

TheStreet Recommends

The billionaire who also runs SpaceX made the statement during a summit hosted by investors Chamath Palihapitiya, Jason Calacanis, David Sacks and David Friedberg for their “All-In” podcast.

Twitter informed the SEC earlier in May that the total of fake accounts, which are also  called bots, was under 5% of its 229 million month active users. Musk previously said there is "some chance" the number of fake and bot accounts "might be over 90% of daily active users", but provided no data or claims for his assertion. 

Analysts at Hindenburg Research, a known for being short-sellers, cautioned last week that the deal could be 'repriced' if Musk threatens to leave the deal. 

Hindenburg said Musk could choose to pay the $1 billion break-up fee tied still emerge with a better outcome compared to renegotiating, noting his "significant leverage" over the micro-blogging website and because another bidder has not emerged.

Musk's Previous Battles With SEC

Musk has battled the SEC in the past when he said he could take Tesla private and later paid a $20 million fine. He signed an agreement in 2018.

In April, a New York federal judge told the billionaire in a ruling that he would not end the agreement that called for him to have his social media posts approved by a company attorney if they consisted of material information about Tesla.

Musk pushed backed and said that previous agreement hindered his ability to have freedom of speech. He said the SEC used the agreement to “launch endless, boundless” investigations of his public statements.

“None of the arguments hold water,” Judge Lewis J. Liman of the U.S. District Court for the Southern District of New York wrote in a ruling of his claims.

Musk began his battle with the SEC in 2018 when he tweeted and claimed that he had "secured" the financing needed to take Tesla private. The SEC sued him for committing fraud after determining that he had only started discussions with investors.

He has been accused of violating the terms of his agreement with his copious tweets.

Financing for Deal Could be Problem

Musk, who does not have a large amount of liquid assets, has sought to receive bank loans but also a $12.5 billion margin loan secured by Tesla shares to finance his bid for Twitter.

A $7.1 billion in preferred-equity commitments from a group of investors including Oracle (ORCL) - Get Oracle Corporation Report Founder Larry Ellison, Sequoia Capital, Qatar Holding and Saudi Prince Al Waleed bin Talal Al Saud, a current Twitter shareholder, allowed him to lower his margin loan.

He also secured another $1 billion equity commitment, recently two sources told TheStreet on condition of anonymity.