Explained by experts: Why Elon Musk is not buying Twitter

After the announcement for Musk, Micro-blogging platform Twitter recently announced it was going to sue Tesla CEO Elon Musk for terminating the $44 billion takeover deal.

A prime reason for Elon Musk backing out of the Twitter deal stems from the proportion of bots on the social platform.

Elon Musk-Twitter Deal: Finally, Tesla CEO Elon Musk has cancelled the $44 billion Twitter buyout deal. Earlier, Elon Musk had put the deal on hold over the actual number of spammy/fake accounts and bots on the platform, and sought a reply from Twitter CEO Parag Agrawal.

Musk's legal team said in a US Securities and Exchange (SEC) filing that he is terminating the deal because Twitter was in "material breach" of their agreement and had made "false and misleading" statements during negotiations.

After the announcement for Musk, Micro-blogging platform Twitter recently announced it was going to sue Tesla CEO for terminating the $44 billion takeover deal.

TRENDING NOW

Twitter Chairman Bret Taylor said in tweet that the "board is committed to closing the transaction on the price and terms agreed upon with Musk and plans to pursue legal action to enforce the merger agreement.

The Twitter Board is committed to closing the transaction on the price and terms agreed upon with Mr. Musk and plans to pursue legal action to enforce the merger agreement. We are confident we will prevail in the Delaware Court of Chancery.

— Bret Taylor (@btaylor) July 8, 2022

"We are confident we will prevail in the Delaware Court of Chancery," Taylor added.

Why Elon Musk is not buying Twitter ?

According to the industry expert, Prabhu Ram - Head-Industry Intelligence Group - CMR, Elon Musk terminating the Twitter deal is almost akin to an ‘Armageddon’ moment for the social media platform. Twitter has been battling user decline, poor marginal ad revenue growth and, is now faced with a slowing economy.

- A prime reason for Elon Musk backing out of the Twitter deal stems from the proportion of bots on the social platform.

-Twitter will now need to plan its external growth strategy, while contending with changing internal employee dynamics. For Twitter to get into a prolonged court battle with Elon Musk will be a very risky move.

- Either Elon Musk would walk away by paying the termination fee, or, there will be a renegotiation on the deal value.

- "Make no mistake. The Elon Musk - Twitter saga is far from over," Ram told Zee Business.

According to Faisal Kawoosa, founder analyst at TechArc

- The decision on acquisition of any business is linked to its earnings potential.

- Presence of BOTs in any digital business, including Twitter beyond tolerable levels, which are difficult to define, impediments the revenue as well as valuation prospects.

- "Twitter deal by Elon Musk might be first of its kind, but I am sure in future, such deals will go for similar due diligence," Kawoosa told Zee Business.

Amit Relan, CEO & Co-Founder, mFilterIt, a global ad fraud detection and prevention company, told Zee Business: "Entrepreneurs seeking investment show up the performance in terms of users acquired, transactions they do, the traffic they bring in, daily and monthly active users, GMV, and other key metrics. For achieving these numbers, they have a mix of organic and inorganic endeavours under the ambit of digital marketing."

"mFilterIt has been validating and auditing the ad spends of several key native digital brand who have cumulatively spent over a billion-dollar over these years in achieving these metrics to drive business. For businesses, at whichever level of the digital horizon they are, spending digitally is no longer just getting signup, or a like or comment," he explained.

"The topic of fake bot engagement is estimated to range from 20-70% across the different social media platforms and sectors and has been an impending issue creating a long-lasting impact on the ad valuations and the revenue generation of the brands," he further added.

Meanwhile, a report from IANS said that Musk, who has cancelled the $44 billion Twitter buyout deal, will have to pay $1 billion in termination fee to the micro-blogging platform. As per an earlier filing with the US Securities and Exchange Commission (SEC), "Musk will be required to pay Twitter a termination fee of $1 billion", if he cancels the deal.

TAGS: