Despite Tesla (TSLA) CEO Elon Musk threatening to abandon the Twitter (TWTR) buyout deal amid a data impasse, the social media company plans to put the matter to a shareholder vote as early as next month. Musk agreed to acquire Twitter for $44 billion in cash, a deal he plans to partly fund with some of his Tesla shares.
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According to a Reuters report, Twitter shareholders may be called to vote on the Musk deal in either late July or early August. However, the deal has run into serious trouble, with Musk warning that he could abandon it if Twitter fails to furnish him with enough data to help him understand the extent of fake accounts on the social media platform.
While Twitter claims that less than 5% of its active accounts are fake, Musk believes that more than 20% of the accounts are fake, resulting in a stalemate between the two. Twitter has expressed concerns that an external review of its fake accounts would require private information that it could not share. However, Musk thinks that Twitter’s reluctance to release the data may be a sign that it lacks confidence in its fake account estimates.
Is Twitter Yielding to Musk’s Demand to Save the Deal?
If the deal falls through, then either Twitter or Musk could face a $1 billion penalty in the form of a breakup fee. According to an Associated Press report, in an effort to clear the impasse and get the deal moving, Twitter plans to give Musk access to the data he wants.
Wall Street’s Take
Twitter stock has a Hold consensus rating based on one Buy and 25 Holds. The average Twitter price target of $51.72 implies 28% upside potential to current levels. Musk had agreed to purchase Twitter for $54.20 per share.
Blogger Opinions
TipRanks data shows that financial blogger opinions are 69% Bullish on TWTR, compared to a sector average of 66%.
Key Takeaway for Investors
If Twitter proves that its fake accounts are less than 5% of its active accounts, then it would become difficult for Musk to walk away from the deal. However, if it turns out that Twitter underestimated its fake accounts, then Musk can easily walk away from the deal and Twitter could be accused of misleading investors about its account metrics.
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