Why have bogus accounts become a stumbling block in Elon Musk’s Twitter purchase?

Elon Musk’s $44 billion attempt to buy Twitter hit an unexpected snag early Friday morning, when he announced that the acquisition had been placed “temporarily on hold,” citing concerns over the platform’s predominance of bot and spam accounts.

Musk also included a Reuters piece about a public filing from Twitter earlier this month that stated that false accounts make up fewer than 5% of the platform’s users. Musk expressed his scepticism, requesting “information supporting calculation that spam/fake accounts do really comprise less than 5% of users.”

Musk assured spectators nearly two hours later that he is “dedicated to acquisition.” However, the harm had already been done. The price of Twitter stock dropped by more than 9% on Friday.

According to market analysts, Musk’s concern about fraudulent accounts might be used as a pretext to negotiate a cheaper price for the acquisition or abandon it completely. Both Tesla and Twitter’s stock values have dropped in the weeks since Musk agreed to buy the social media network on April 25, perhaps making the deal less appealing to Musk.

“I believe he’s still committed in theory, probably at a lesser price,” said Dan Ives, a managing director of stock research at Wedbush Securities, who follows the tech sector carefully. “It begins with a boy who cried wolf.”

Musk is an unexpected figure who defies straightforward analysis of his ideas. However, he has previously expressed worry about bogus accounts. Musk tweeted on April 21, just days before reaching an agreement to buy Twitter: “If our twitter bid succeeds, we will defeat the spam bots or die trying!”

There are two possible reasons why Musk is concerned about fraudulent accounts. For starters, they pose a danger to the company’s business strategy. Second, they have the potential to smear the platform’s reputation as a genuine forum for genuine user interaction.

Twitter makes the majority of its money by selling ads to its users, so the number of people who view the ads is extremely important to the company’s success.

In the first quarter of this year, the business claimed 229 million people accessing Twitter on a platform where they could be served adverts on any given day, a 15.9% rise over the same quarter a year ago. For the first quarter of this year, the company recorded $1.2 billion in sales, with $1.11 billion coming from advertising.

If the number of spam or bot accounts on Twitter is more than the business has calculated, it might reduce the number of monetizable users and ad revenue generated. As a result, Twitter’s bottom line may suffer.

In a statement to ABC News, Susannah Streeter, a senior investment and markets analyst at Hargreaves Lansdown, said that an accurate estimate of the number of fake accounts is critical “given that establishing an accurate number of real tweeters is considered to be key to future revenue streams via advertising or paid for subscriptions on the site.”

Musk has previously expressed concern about bot accounts, citing the potential for them to damage Twitter’s role as a “de facto public town square,” as he has called it. If Twitter messages cannot be trusted as genuine comments from real people, the usefulness of the platform’s debate suffers.

“Twitter has so much potential to be the most trusted and inclusive platform in the planet!” Musk sent a tweet on May 3rd.

“That’s why we need to get rid of bots, spam, and frauds. Is it really public opinion, or is it just someone with 100,000 bogus accounts? You can’t tell right now, “Minutes later, he added a follow-up tweet.

Following the 2016 presidential election, when it was discovered that Russian operatives had used phoney accounts to distribute misinformation on a large scale, public interest in fake accounts on social media platforms grew. According to the Washington Post, Twitter increased its efforts to delete fraudulent or questionable accounts in 2018, suspending more than 70 million of them in May and June of that year.

Twitter, for one, has admitted that measuring the amount of fraudulent accounts on the platform is difficult. Twitter added a caveat to its public filing this month, stating that fake accounts make up less than 5% of users: “In making this determination, we applied significant judgement, so our estimation of false or spam accounts may not accurately represent the actual number of such accounts, and the actual number of false or spam accounts could be higher than we have estimated.”

Musk agreed to buy Twitter for $54.20 per share last month, a 38 percent premium over the share price before it was revealed that Musk had been purchasing the company.

According to the Wall Street Journal, Musk is being investigated by the Securities and Exchange Commission for failing to disclose regulators about a 9.2 percent interest in Twitter that he purchased earlier this year. Similarly, the Federal Trade Commission is investigating the deal for potential antitrust violations.

According to Wedbush analyst Ives, Musk’s announcement on Friday casts doubt on the acquisition’s result.

“This is still a circus display that is putting the deal in jeopardy,” he remarked. “Right now, the prospects of a deal getting done are probably less than 50%.”

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