Elon Musk will either pay far less for Twitter or use fake accounts as an excuse to walk away, experts say

Elon Musk wants to renegotiate the deal if Twitter cannot prove that fewer than 5% of users are bots.

AP

• Elon Musk continues to delay his $44 billion Twitter deal over the number of bots on the platform.
• The founder of social media app MeWe told Insider $23 billion is a fairer price to pay.
• A Wedbush analyst said Musk has two options: renegotiate or use it as an excuse to pull the plug.

Elon Musk's $44 billion Twitter acquisition continues to hang in the balance after the Starlink and Tesla CEO put the deal on hold pending confirmation of the number of bots on the platform. 

Last weekend, his rhetoric intensified, first calling Twitter's lack of clarity on how the company calculated the 5% bots figure "very suspicious". He then agreed with a comment suggesting that if 25% of users on Twitter were bots, the deal to buy the platform should cost 25% less, which would knock a potential $11 billion off the sale price.

As scrutiny of Musk mounts and his other companies lose value, the billionaire is under pressure to make a decision on the takeover before his net worth declines even more. Experts say he two options: renegotiate the deal, or walk away entirely. 

How many bots are on Twitter? 

Twitter's official estimate is that less than 5% of its 229 million monetizable daily active users are automated bots.

That differs from research by Dan Brahmy, CEO of the Israeli tech company Cyabra, who gave Reuters an estimate of 13.7%. Musk himself told the "All In" podcast he thinks the number is at least 20%.

But most experts have argued it is very difficult to quantify the number of bots on Twitter, with Kai-Cheng Yang and Filippo Menczer arguing in The Conversation that the definition of a bot is disputed, and that the argument misses the point because it ignores different users' experiences.

The number of genuine active users has implications for the final price of a deal.

Mark Weinstein, founder of MeWe, a "freemium" social networking app with 20 million users, told Insider that advertisers give Twitter money on the basis they are marketing to humans. If millions of users are actually bots, then Twitter would be worth less, he said. 

"If it was proven that 25% of the [users] were actually bots, then advertisers would demand a lower rate, if Twitter was unable to filter them out," Weinstein said. 

Will Musk get his 25% discount?

Weinstein argued a fair price for Twitter was closer to $23 billion. He is not alone in thinking the current deal is overvalued. 

"There's clearly an argument that his offer is inflated," Weinstein said. "And it maybe should be adjusted to reflect the [user] revenue reality and the calculation for value based on that."

In a recent research note, Wedbush analyst Dan Ives said the $54.20 a share offer was "out the window" as scrutiny on the number of bots increased. But if a new price can't be negotiated, Musk will be forced to pay a $1 billion break fee.

"We believe it's currently a 60% chance that Musk tries to walk and use this spam account issue as the scapegoat to get out of the deal and a 40% chance Twitter's board and Musk come to a new deal price over the coming weeks," Ives said.

That new deal, Ives said, would be somewhere closer to the mid-$40 a share mark – a steep discount that would bring Musk close to his 25% discount demand.

However, Ives said Musk needed to hurry up before Tesla and Starlink stock fell again: "Musk is facing a fork in the road situation in which he has to decide his next step in this soap opera as Tesla investor patience is wearing very thin." 

Twitter declined to comment.

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